Lloyds cuts bonuses over mis-selling insurances
LLOYDS BANKING Group has dramatically reduced the bonuses previously awarded to its former chief executive and 12 other senior directors, making it the first UK bank to hold staff accountable for the wide mis-selling of payment protection insurance.
Eric Daniels, who led the state-backed bank until last March, will suffer the greatest loss after Lloyds stripped him of 40 per cent, or £580,000, of the £1.45 million bonus he was granted for 2010.
Four other senior directors – Tim Tookey, finance director, and Truett Tate, head of wholesale, who are both leaving Lloyds this month, and former directors Helen Weir and Archie Kane – will lose 25 per cent of their awards.
The nine remaining members of Lloyds’ executive committee will be forced to surrender 5 per cent of their payouts, the bank said yesterday.
The move is the first example of a UK lender reclaiming bonuses paid to top staff since the Financial Services Authority introduced new “clawback” rules in 2009.
Lloyds signalled last year that it would try to recover bonuses paid to the executives who were in charge at the time when payment protection insurance (PPI) was most aggressively sold.
The product – which covers loan repayments if a borrower falls ill or loses their job – sparked what has turned out to be one of the worst consumer scandals in decades.
As the biggest provider of PPI, Lloyds took the largest charge – £3.2 billion – for refunding mis-sold to customers.
The bank’s earnings, due to be published on Friday, are expected to take a large hit from the refunds. In total, British banks have set aside more than £6 billion in compensation.
The banks ran into problems when the FSA introduced changes to the way PPI could be sold and demanded that banks refund customers who had been wrongly provided the product in the past. The banks initially challenged the FSA but lost a key court battle early last year.
António Horta-Osório, Lloyds’ new chief executive, then decided to end the legal fight and set aside £3.2 billion to compensate customers, a move that all the other banks followed. – (Copyright The Financial TimesLimited 2012)