Senior executives at Britain's largest bank, HSBC, are set to lose out on thousands of pounds of bonus payments after a mis-selling scandal that cost the company £40m.
Managers are seeing their payouts reduced after the bank was fined £10.5m by the Financial Services Authority and ordered to pay £29.3m in compensation in December, following the revelation that it sold £300m of unsuitable bonds to elderly or disabled customers.
Under his contract, HSBC chief executive Stuart Gulliver could earn up to £12.5m in cash and shares. But the mis-selling affair is reportedly eating in to not only Mr Gulliver's personal bonus, but also the overall pool for payments for other employees. The news came as the company was preparing to announce its 2011 profits, expected to be as high as £14bn, as well as, for the first time, the pay of its top eight executives. A source indicated that the move to reduce bonus payments in acknowledgement of the scandal is a routine measure under the terms of staff contracts, though it is being viewed as an attempt to improve the bank's image in anticipation of further controversy surrounding bonus levels at British banks. The bank said last year that it was "profoundly sorry" for the mis-selling incident, which saw 2,485 customers of its subsidiary NHFA being advised to invest in the bonds, despite it later being revealed that 87 per cent of the sales – whose customers had an average age of 83 – were unsuitable.
The cuts come a week after Lloyds became the first British bank to demand that executives repay parts of their bonuses, clawing back £2m from 13 directors due to the mis-selling of £3.2bn in payment protection insurance. The HSBC cuts are likely to be less severe.
In its annual report, due out today, HSBC will be the first British bank to publicly document and explain the pay of its top eight executives. But the report may not offer details as to who has been hit by the cuts and by how much.