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UK banks are set to be embroiled in controversy once again with fresh claims of mis-selling.

UK bank shares took a tumble when the Financial Ombudsman earlier last week said they had received up to 4,000 complaints (a week) about mis-sold loan insurance. The overall figure, however, is thought to be much larger — around 2 million UK customers.

UK customers believe they have been mis-sold insurance to cover events such as credit card fraud. The Financial Conduct Authority said 11 lenders and card issuers had voluntarily agreed to compensate customers including Barclays (LSE: BARC), HSBC(LSE: HSBA.), Lloyds Banking Group (LSE: LLOY) andRoyal Bank of Scotland (LSE: RBS).

Where does another mis-selling scandal leave the UK High Street banks?

Lloyds has so far set aside £11.3bn for compensation for the mis-selling of loan insurance, more than any other bank. Lloyds set aside nearly £10bn worth of PPI compensation — more than any of the “Big Four”. Barclays, Royal Bank of Scotland and HSBC have also set aside billions of pounds of compensation, which will have a knock-on effect for their balance sheets.

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