Judgment in Respect of Hopcraft Case

Close Brothers Group plc ("Close Brothers" or "the Group") notes the publication of the judgment in respect of the "Hopcraft" case, upholding the claimant's appeal against Close Brothers Limited ("CBL"). The case, which was initially determined in CBL's favour, was heard in early July 2024 by the Court of Appeal ("the Court") together with two separate claims made against another lender.

Close Brothers disagrees with the Court's extension of the existing case law in this area and intends to appeal this decision to the UK Supreme Court.

The Court has determined that motor dealers acting as credit brokers owe both a disinterested duty and a duty of loyalty ("fiduciary duty") to their customers. This sets a higher bar for the disclosure of and consent to the existence, nature, and quantum of any commission paid than that required by current FCA rules, or regulatory requirements in force at the time of the case in question.

The financial impact of the Hopcraft case in isolation is not material to the Group. However, subject to the appeal to the UK Supreme Court, the judgment may set a precedent for similar claims, which may (depending on the specific facts of those cases) result in significant liabilities for the Group. The range of outcomes in these circumstances is currently uncertain, and the overall cost to the Group will depend on, amongst other factors, the application of the Court's ruling, the number of claims received, the facts and circumstances of each individual claim, and the level of compensation, if any, granted by the Court in each case. It is therefore currently not possible to assess the timing, scope or quantum of any potential financial impact on the Group.

While the judgment is likely to extend the current period of uncertainty for the Group, we will continue to focus on supporting our customers and protecting our valuable business franchise. The Group is in a strong financial position, with a CET1 capital ratio of 12.8% as at 31 July 2024. As announced in our Full Year 2024 Results, the Group already has a number of actions in progress to further strengthen its capital position, including the agreed sale of Close Brothers Asset Management which is expected to increase the group's CET1 capital ratio by approximately 100 basis points. Our conservative approach to funding is based on the principle of "borrow long, lend short" and we hold liquidity levels comfortably ahead of both internal risk appetite and regulatory requirements, with a 12-month average Liquidity Coverage Ratio in excess of 1,000% as at 31 July 2024.

We will be temporarily pausing the writing of new UK motor finance business while we review and implement any relevant changes to our documentation and processes to ensure compliance with these new requirements.