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This is directionally important, even though the headline number (£1bn reduction) looks modest.

Here’s what actually matters beneath it.

⸻

1. The signal is bigger than the £1bn

A £1bn reduction on an £11bn scheme is only ~9%, which by itself doesn’t radically change industry economics.

But the key point is why:

• FCA is revising the definition of “unfair relationships”

• narrowing scope of affected commission arrangements

• responding to industry legal arguments

That tells the market something crucial:

the scheme is negotiable and being recalibrated, not imposed rigidly.

That is far more valuation-relevant than the raw £1bn figure.

⸻

2. Captive lender relief matters indirectly to CBG

Close Brothers is not a captive manufacturer lender, but:

• If captives receive scope relief, legal consistency pressures the FCA to apply similar logic across the market

• That tends to pull the entire liability framework downward, not just the captive segment

• It strengthens the probability of a tiered or narrower scheme

So even targeted relief elsewhere still benefits CBG sentiment.

⸻

3. What the market will read into this

Investors won’t focus on “£1bn less”.

They will read it as:

• FCA responding to lobbying and legal risk

• willingness to refine thresholds and scope

• reduced probability of an extreme liability outcome

That lowers tail-risk pricing — which is exactly what has been depressing mid-cap lenders like CBG.

⸻

4. Practical implication for CBG valuation

If the scheme evolves from:

• “blanket presumptive unfairness”

to

• “narrower, evidence-based unfairness”

then:

• probability of additional large provisions falls

• capital return scenarios (buyback/dividend restoration later) become more credible

• the discount to tangible NAV compresses

That is what drives the share price, not the absolute industry compensation number.

⸻

Bottom line

This isn’t a dramatic headline cut — but it is a policy direction shift:

• FCA signalling flexibility

• legal pressure biting

• scheme gradually narrowing

Those are exactly the incremental signals the market needs to re-rate lenders over time, even if the final resolution still takes months.

That’s kind of you thanks.

Had a poster get quite aggressive with me for I know not what reason, and I was taken aback to be honest, so it discouraged from posting.

I’m surprised by the sp decline as I do go think the stars are aligning for long term holders here, of which I’m one. I suspect you’re right and to misquote Knot - the elastic will ping on this fairly soon. GLA

The Chat view on this fwiw:

1. This is standard regulatory sequencing, not a motor-finance signal

The BNPL announcement is simply the FCA implementing legislation Parliament already passed — bringing deferred-payment credit under regulation. It’s operational work:

• Authorisation regime

• Consumer Duty application

• Affordability checks

• FOS jurisdiction

Nothing here affects:

• the motor finance consultation

• redress methodology

• provisioning assumptions

• or lender capital positions

So no mechanical impact on Close Brothers.

⸻

2. But the tone is very revealing

Look at the language carefully:

“We want the BNPL sector to thrive…”

That is growth-supportive regulatory language, very similar to what you’ve been seeing lately around motor finance hearings and speeches.

The FCA is increasingly signalling:

• “We regulate, but we don’t want to break credit markets.”

• “Proportionate protections” rather than retrospective punishment

• emphasis on future conduct, not historic compensation

That tone shift matters because it aligns with the Treasury’s broader growth / competitiveness pressure on regulators.

⸻

3. Strategic implication for the motor finance situation

The same regulator that is:

• actively trying to avoid credit supply contraction in BNPL

• stressing proportionate rules

• and publicly saying sectors should “thrive”

is politically unlikely to simultaneously impose a maximum-severity retrospective £20bn shock on the motor finance lending system unless forced to by law.

That doesn’t mean:

• “no redress”

but it does reinforce the probability of:

• narrowed scope

• refined methodology

• lower effective payout per agreement

• or staged implementation

Exactly the outcomes markets have been slowly starting to price in.

⸻

4. Bottom line

This BNPL announcement doesn’t move CBG directly.

But it confirms the regulatory climate is shifting toward controlled, growth-aware regulation rather than shock-therapy enforcement — and that direction is broadly supportive of lenders’ negotiation position in the motor finance dispute.

Interesting feature on cnbc this morning re 2026 being a big year for bank m&a, especially in Italy, uk and nordics.

This follows a feature on cnbc yesterday in which a US bank analyst was saying that US banks are only a third of the way into their current growth phrase.

Yankee raiders on the horizon?

I do hope you’re right; either way merry Christmas to all on a bulletin board that has been a constant source of fantastic insight this last year

GLA in 2026

Don’t worry about my coffee it was more than worth it for the giggles - thank you so much!

I’ve just gone through some of your other posts and they’re great value, you write in the style of a very arch and mildly scandalised rural Georgian vicar.

‘I’ve rarely’ ‘sadly’ ‘of more immediate concern’ etc - class, keep it up.

I had quite a radical English teacher at school whose view was basically - the longer and more ‘flowery’ the sentence, the shorter the manhood of the writer. (He was adamant this was a male thing).

I think he was suggesting something along the lines of the writers being little pr**ks but what do I know, he was more educated than me.

Please keep it up though, these bb’s shouldn’t just be money money money; we have to have time for a laugh as well.

Best and bless

Blimey. Who got a thesaurus and an attitude as early Christmas gifts then?

Impressive use of though, fair play, made me spit out my coffee laughing thanks

To paraphrase Oscar Wilde ‘I don’t always agree with your point of view NiharR, but will defend your right to express it’.

I understand your frustration with CBG management but these things take time, try to think of it as akin to the old Morecambe & Wise Andre Previn sketch:

They’re playing all the right notes, but not necessarily in the order you Nihar would like them!

All the best to all posters regardless of viewpoint and thanks for an amazingly informative bb this year - gla

Hxul

To quote John Swift KC in the paper that Liberty2 kindly shared yesterday:

‘If nearly half of agreements were unfair for 17 years, what exactly was the Regulator doing?’

The guns are now not only parked on the FCA’s lawn, they’re being oiled and there’s a distinct whiff of powder in the air. GLA

Thanks Stoopid. IMO this article reinforces what’s been quietly happening behind the scenes rather than changing the picture. We’re now in ‘negotiation phase’

First, the £18–20bn figures being floated aren’t “new information” so much as negotiating numbers. That’s straight out of the playbook. If you want Treasury attention, you don’t walk in with the FCA’s £11bn — you walk in with a number big enough to spook bond desks and ministers. That tells you this has moved beyond regulator vs lenders and firmly into Treasury territory.

Second, notice how the criticism has shifted. This is no longer just “too expensive”. It’s now:

• the definition of unfairness is too broad,

• the maths doesn’t reflect actual loss, and

• the scheme ignores the fact that commissions were often used to subsidise car prices.

That’s important. It reframes the debate from “banks resisting compensation” to “the FCA compensating people who may not have lost anything”. Politically, that’s a much harder position to defend.

Third, the Supreme Court point keeps cropping up for a reason. Reuters is careful, but the implication is clear: the FCA is stretching the judgment, especially on tied relationships and automatic unfairness. That’s where the real legal fragility lies, and everyone involved knows it.

Now, in terms of how this plays out:

• The FCA wants a win that looks like consumer protection.

• Banks want a cap on liability without looking like villains.

• Treasury wants growth, credit availability, and no gilt wobble.

• Investors want clarity, not Groundhog Day.

Those incentives don’t point to a full £20bn apocalypse — they point to a materially narrowed scheme dressed up as “refinement”.

That’s why the language from Rathi has softened (“adjust and refine”), why banks are now openly talking to government, and why Reuters is framing this as a test of the FCA, not a fait accompli.

Would be interested in and appreciate Knot’s regular update re short interest.

Could also be that background discussions are progressing in our favour. Either way GLA

Useful namecheck of CBG by the Chancellor there, I wonder if other matters have been discussed. Lol

Is determinism; the way you play it is free will’ Nehru

This is a classic multi-stage game with incomplete information, reputational stakes, and political noise. The FCA’s formal power to impose redress exists, but enforcement and design are constrained by court precedents (Hopcraft), legal frameworks (FSMA s.404, Limitation Act), and political/economic headwinds (Reeves, consumer optics, credit markets).

If you run this through a game theory lens, focusing on the three key players:

• FCA (the regulator)

• Banks

• Consumers/Claims Management Companies (CMCs)

THE SCENARIO: “FAIR BUT WORKABLE” OUTCOME

➤ FCA’s Strategic Position:

• Wants to be seen as consumer champion and not a paper tiger.

• Fears a legal challenge it could lose (Clydesdale weakness, ultra vires under s.404, time-bar issues).

• Has political incentive to be tough publicly (anti-bank sentiment), but enough internal feedback now to realise their current scheme might implode in court.

So the FCA now aims for maximum consumer redress with minimum legal exposure.

STAGE 1: CONSULTATION + SIGNALS

• Banks send strong legal signals: they will challenge the scheme unless it’s watered down. Key legal issues are:

• Attribution (Hopcraft)

• Time limitations (s.32)

• DCA fairness thresholds

• Conflict of interest assumptions

• FCA floats language like “adjust”, “refine”, “feedback welcome” (see Rathi’s latest speech) — this is classic soft game theory signalling: they’re testing how far they can push without triggering all-out war.

• Consumers/CMCs push for clarity but don’t drive this stage. Their power lies later, if ambiguity leads to delays or court cases.

STAGE 2: THE BARGAINING WINDOW (Q1 2026)

Nash equilibrium?

The most likely outcome is mutual concession:

• FCA preserves face with “refined” scheme (e.g. exclude pre-2020 cases, time bar from 2021, cap payouts or restrict to Hopcraft-like circumstances).

• Banks accept, don’t litigate, because it’s cheaper and less messy than a drawn-out JR or SC appeal.

• CMCs make noise, but can’t stop it.

This is the “fair but defensible” zone the FCA is manoeuvring toward.

STAGE 3: POST-MARCH RULES & IMPLEMENTATION

• Final scheme rules out Feb–Mar 2026.

• If FCA concedes ground and sets clear time bars, fair thresholds, and caps, most firms comply.

• CBG, LLOY etc. rally sharply because provisions already taken exceed actual payout risks.

• If FCA overreaches and insists on full-fat scheme → legal challenges begin Q2–Q3 2026. Share prices volatile, longer tail to resolution.

This is drifting towards a negotiated outcome, not a regulatory steamroller. Time limitations, legal inconsistencies post-Hopcraft, and cost-benefit reality are forcing FCA’s hand — they’ll likely go for a “reduced-fat” scheme that can’t be challenged easily.

If they get this “right” by March, CBG is massively undervalued at curre

Liberty2 kindly posted a link to Stephen Neville’s legal critique earlier today; given the issues now being raised on the board I’d strongly advise anyone interested read it. Layman’s (ie mine) synopsis:

1. Redress should mirror the legal position, not FOS-style “fairness”

the FCA can’t bypass the courts and impose redress for situations where a court would not award damages.

This is a direct shot at the FCA’s use of Section 404 FSMA, which explicitly requires that the redress must match what consumers would get in court.

“There is no basis for automatically triggering redress when [DCAs or contractual ties] are present.”

That echoes a lot of what Liberty2, Knot, and others have been saying — that Hopcraft confirmed unfairness is context-specific, not automatic.

2. His suggested “Plevin-style” thresholds would nuke most of the £11bn estimate

Redress only if: undisclosed commission is more than 50% of Total Credit Cost (like in Plevin), or a specific promise was broken (like in Hopcraft, where the court found a false impression had been created). Billions wiped off liability.

3. FCA is ignoring its own market research + past conduct

“The proposal did not represent the view held by the FCA for the past decade, and is inconsistent with its conduct throughout that period.”

This hammers the hypocrisy argument. The FCA allowed this for years, supervised the sector, made no enforcement moves, and is now trying to rewrite the rules.

4. Prevents lenders from showing there’s no loss This is hugely significant. Courts always allow defendants to show there’s no damage. But the scheme assumes damage exists — simply because a DCA was used — and then prevents firms from defending themselves. Neville calls this “arbitrary and unheard of”

5. Even the FCA’s own legal position is being contradicted “[The scheme] even runs contrary to the submissions made by the FCA’s own counsel to the court when intervening in that case.” This isn’t just weak law — it’s potentially dishonest regulation.

6. Treasury’s FOS reforms are being ignored

There’s a wider point here — the government has just promised a more balanced, legally grounded FOS. The FCA is pushing a scheme that expands the least accountable mechanism (FOS-style fairness) into a quasi-court system, backed by law, but without legal safeguards.

Likely Implications:

• This argument will almost certainly show up in Judicial Review proceedings. It’s laying out a path for lenders to say: “We accept some redress is due — but the FCA’s scheme is wildly overreaching.”

• The “Plevin-style” cap is a likely compromise It would give consumers something, but remove the mass liabilities.

Final Thought:

If this article is even half-right — and it tracks very closely with both Hopcraft and FSMA — the FCA scheme in its current form cannot survive intact. It will either be cut down pre-launch, watered down mid-flight, or overturned

There’s a bit of circular logic creeping in here.

Yesterday the argument was:

“Consumers will just go to the FOS and win anyway, because the FOS can rule on fairness even where there’s no breach of law.”

Today the argument is:

“The FCA must base its scheme only on the law as it exists today, not on what future courts might say.”

Those two positions can’t both be true.

If the FCA is anchoring itself firmly in law, then Section 404 requires an actionable breach of regulatory requirements. Hopcraft seriously weakens the FCA’s ability to claim that DCAs or ‘35/10’ automatically constitute such a breach — especially given the Supreme Court said the dealer is not the lender’s agent, not a fiduciary, and is acting on its own commercial incentives.

If, on the other hand, the FCA is anchoring itself in FOS-style fairness, then let’s not dress that up as legal certainty. That’s essentially saying:

“We’re unsure what the courts would do, so we’ll impose a wide scheme anyway.”

You can’t claim the scheme is grounded in solid legal footing and simultaneously rely on the FOS’s much looser fairness test to justify it.

And this matters, because the entire industry pushback — from Lloyds to Santander to Barclays — is aimed at exactly this point:

the FCA is trying to use a fairness outcome (FOS-style) to justify a legal mechanism (Section 404) that requires genuine breaches.

That’s why people keep saying the scheme is ultra vires.

That’s why the ‘35/10’ test looks dead on arrival.

And that’s why time-bar arguments suddenly have teeth.

So yes, consumers will get redress — but the idea that the FCA can simply ignore the legal constraints because “FOS might have upheld some complaints anyway” is precisely the problem the lenders will take to court if the FCA doesn’t narrow this dramatically.

Now THAT’S what I’ve been hoping for!!

Rathi the politician playing the odds.

The irony in calls for the FCA to investigate the uncertainty the Budget may have caused in financial markets; when the FCA’s sole actions have caused so much uncertainty - deliberately or otherwise..:

Understood, and that would indicate no change in their stance - at this stage.

If they currently felt pressured I’d have hoped for the start of a managed climb down. In game theory terms moving from a deterrence and dominance phase to a cooperative signaling phase; this doesn’t feel like that.

But as you say, it’s wait and see. They can’t get away with this in its current guise imo

Good luck all

Thanks Liberty2.

‘the number of complaints falling out of the currently proposed scheme should be relatively low’

So not softening there then, whatever happened to proportionality?

Really not sure what management can ‘publicly’ do at the moment.

Doesn’t the consultation period end next week? I’d be amazed if discussions weren’t at pace currently behind the scenes; I wonder if we’ll start to hear some mood music from end of consultation period and into year end