Banking shares were dragging the FTSE 100 down on Monday after Barclays and HSBC became the latest high street groups to announce compensation provisions for mis-selling payment protection insurance.

Their shares tumbled 1.47 per cent and 1.57 per cent respectively after both made morning statements.

These follow the announcement by Lloyds last week to acknowledge its liabilities.

Only part-nationalised Royal Bank of Scotland has declined to provide provision. Arguably, its decision has meant that its shares have suffered more than the others, down 2.2 per cent on Monday morning.

Barclays' chief executive Bob Diamond said: 'We have taken this decision because it is in the best interests of our customers, as well as for Barclays and its shareholders; creating certainty, particularly regarding past issues, is of benefit to all parties.

'We don't always get things right for our customers; when we get them wrong, we apologise and put them right. That's our commitment to our customers, and it applies to the way in which we will deal with PPI complaints.'

While it said it cannot be certain of costs at this stage, Barclays will set aside £1 billion for future redress and administration.

Around the same time, HSBC announced that it is to set aside £269 million, while last week, rival Lloyds made a £3.2 billion PPI provision.

Last Thursday saw RBS state it has not made any provision for claims relating PPI.

'RBS continues to settle claims where we believe that the customer has not been treated fairly or has suffered some detriment. However, a decision on appeal of the court case, led by the British Banking Association, has not yet been made as it relates to important other issues of retrospective regulation.'

'The uncertainties around the outcome of the PPI action mean that, at this time, the group is unable reliably to estimate any potential financial liability, although it could prove to be material,' the group said.

The Financial Services Authority has estimated that collectively, banks will have to pay up to £4.5 billion to settle the thousands of claims.

However, RBS did say it would not fight on after the banks lost their court challenge last month. Its decision matches those of the other big banks and the position has been confirmed by the BBA, which fought the case on their behalf.

The Financial Ombudsman Service welcomed the banks' decision to deal with the mis-selling.

'It's very good news that the banks will not be appealing the High Court's clear-cut judgment, which endorsed the ombudsman and FSA's approach to PPI complaints,' said chief ombudsman Natalie Ceeney.

'Consumers should come to us at the ombudsman if they're unsure about what to do next. Meanwhile we will be working with the banks, over the coming weeks, to ensure that consumers' complaints are dealt with fairly and promptly.'

Consumer groups have been active in advising customers to avoid any company charging fees to pursue PPI compensation cases, as there is a completely free system for compensation available via the original provider and the FOS.