Lloyds cuts bonuses for all staff after PPI scandal

Bank targets current and former directors to retrieve nearly £2m after mis-selling row
Click to follow
The Independent Online

The bonus pot for all of Lloyds Banking Group's 106,000 staff is to be cut this year due to the payment protection insurance (PPI) insurance mis-selling scandal, the company said yesterday.

Lloyds made the pledge as it announced massive "clawbacks" totalling nearly £2m of the bonuses paid to 13 executives last year – twice as much as earlier reports had speculated.

It is the first time a bank has used rules introduced after the 2008 financial crisis allowing them to take back bonuses when things go wrong.

While the directors' bonuses were widely seen as being fair game, cutting the pay for all staff risks alienating the workforce even more after tens of thousands of job cuts.

The vast majority of employees will have had nothing to do with mis-selling PPI. However, given that Lloyds is having to spend some £3.2bn compensating victims, it decided it had no choice. Lloyds staff are awarded their 2011 bonuses this month.

The Financial Services Authority recently said it was "engaging vigorously" with the banks to ensure 2011 bonuses fully reflected the PPI scandal which cost UK banks more than £6bn.

For the 2010 bonus year, Lloyds will take back a portion of share bonuses awarded last February to top executives, including £560,000 from former chief executive Eric Daniels.

The bank, which is 41 per cent-owned by the taxpayer, is due to report its 2011 results at the end of this week with the City expecting an annual loss of £3.2bn.

As well as Mr Daniels, the other current or former directors who are being forced to give back their bonus are the outgoing finance director, Tim Tookey, who will lose £241,000 of his £965,000 bonus; the former head of wholesale banking, Truett Tate, who will lose £263,000 of his £1.05m bonus; and Helen Weir, former head of retail banking, who will lose £218,000 of her £875,000 bonus.

Below board level, another eight executives have been forced to give back just under £100,000 of their earnings for 2010. These include the former head of risk at the bank, Carol Sergeant.

Mr Daniels' replacement as chief executive, Antonio Horta-Osorio, made PPI mis-selling his priority when he joined the bank last year.

He has already given up his 2011 annual bonus, which could have been as much as £2.4m, but this was in part because of the eight weeks he was forced to take as sick leave after suffering severe exhaustion.

No other bank has yet moved to claw back any staff bonuses because of PPI mis-selling.

Lloyds said: "The board's decision is based on the fact that had the outcome of the Judicial Review into payment protection insurance in April 2011 been known, and had the consequential provision made been effected at the time of the award of the 2010 bonus in February 2011, the bonus pool would have been lower and individual bonus awards would also have been lower."

Comments