Lloyds Bank claws back bonuses from top staff who mis-sold PPI
Monday, 20 February 2012 08:40
Lloyds Bank is to arrange for the repayment of parts of the bonuses paid to senior staff as a penalty for the costs the bank incurred as a result of the miss-selling of payment protection insurance (PPI).
Ten senior executives including former chief executive Eric Daniels will have bonus payments worth up to £2 million clawed back. The bank can claw back some of the bonuses because they were awarded in shares over three years so not all the bonuses have been paid yet.
Eric Daniels is expected to have to repay 40 - 50 per cent of a £1.45m bonus, a figure of £600-£700,000. Other executives including three other board members will pay back around £250,000. Four further senior staff will have to repay around £100,000.
This is the first time that senior banking staff has had to repay part of bonuses previously agreed and paid to staff. The move comes amidst public anger and political pressure not to reward poor performance.
Despite the repayments the staff will still have received substantial rewards for performance around the time that saw Lloyds Banking Group make errors and mistakes that led to the requirement of a £21 billion taxpayer bailout.
The PPI scandal saw millions of customers sold insurance protection that was worthless. Following a High Court ruling that the banks lost to the Financial Services Authority (FSA) Lloyds took the lead on the decision not to challenge the ruling and made provision of £3.2 billion in its 2011 finances for settling the PPI scandal and repaying customers.
The FSA urged banks to claw back bonuses received by executives who were involved in setting up PPI. This is the first time a bank has done so.
Lloyds announce their 2011 financial results on Friday and the loss it is expected to announce will be caused in large part by the provision made to compensate customers affected by PPI.
Lloyds share price has suffered during 2011 and the companies’ shares are now valued at about half the level the government paid for its shares when it bailed out the bank in 2008.
Lloyds current chief executive, Antonio Horta-Osorio said last month that he will not accept an annual bonus for 2011.
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