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Close Brothers has said it will almost double the amount of cash it had originally set aside for the car finance compensation scheme , joining rival lenders in challenging the Financial Conduct Authority's (FCA) plans.

The banking group told investors it was adding around £135 million to its existing £165 million provision. This means it is expecting to face a bill of about £300 million to cover costs relating to the issue.

The announcement comes a day after Lloyds Banking Group said it would need an additional £800 million to fund the scheme – bringing its total provision to £1.95 billion.

The banks have been increasing their reserves after the FCA published the details of its proposed compensation scheme for drivers who were mis-sold a car loan between 2007 an

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