Chief executive to forfeit annual award
Lloyds to slash bonus payments to staff after record £117m PPI fine
Lloyds Banking Group is clawing back £2.65 million in staff bonuses and slashing £30m from this year’s bonus pool after being fined a record £117m over the mis-selling of payment protection insurance.
The Financial Conduct Authority slapped the penalty on the bank for its poor handling of complaints over mis-sold payment protection insurance.
Chief executive Antonio Horta-Osorio, who was handed a pay package for 2014 worth £11.5 million as a reward for the bank’s recovery, will forfeit a £350,000 payment.
The bank, which owns Bank of Scotland and Halifax, today apologised and accepted there had been “a failure to provide fair outcomes for a significant number of customers”
Bonuses were suspended for a number of top staff in February and the board has now slashed payments due to the group executive committee and for some other senior executives for their “ultimate responsibility for oversight of the PPI operations”
It will mean that £2.65m in bonuses awarded will be forfeited. The bank’s remuneration committee has also decided to reflect the impact of this fine in this year’s awards and will slash £30m from the pool.
The complaints relate to the period March 2012 to May 2013.
“Although the FCA has not found that the group acted deliberately, the group has reviewed all customer complaints fully defended during the relevant period,” said the bank in a statement.
“This review has been completed and over 90 per cent of customers have received payment and the remainder will be completed by the end of June. The remediation costs of reviewing these affected cases are not materially in excess of existing provisions.”
In 2011 the bank took the lead in paying redress to customers complaining that they had been mis-sold PPI. It said that to handle the complaints it had to be build “significant operational infrastructure” and 7,000 people were involved in the process.
But almost a third of complainants were found to have had no PPI policy with the bank. At its peak in 2012, up to 60,000 complaints were received per week.
Throughout the period it upheld complaints and paid redress to around 63% of customers who had a PPI product and who complained.
“But during this period mistakes were made. In order to move quickly to resolve the unprecedented number of complaints within the FCA timescales (including a significant quantity which upon investigation were shown to have no PPI policy), we needed a clear and simple approach to deliver fair customer outcomes.
“As part of the broader complaint handling process complaint handlers were guided to assume that our PPI sales processes were compliant unless they were notified to the contrary. We did not do enough to tell complaint handlers where they should not rely on this assumption.
“In 2013 we reviewed our processes and procedures. We also engaged closely with the FCA throughout to ensure remediation of all potentially impacted cases in the relevant period.”
The bank said it had “cooperated fully” with the FCA in this investigation and the watchdog had acknowledged that the bank decided at an early stage not to appeal the High Court decision. It was the first bank to “…make clear they would implement the Authority’s changes for PPI complaint handling.”
Credit was also given for having “…spent significant sums instructing third parties to assist it in the remediation of customers who have been treated unfairly.”
The FCA also acknowledges that since 2011 the bank has made “…significant progress towards the fairer treatment of customers in its general complaint handling operation, in particular within its retail banking business.”
Lord Blackwell, chairman of Lloyds Banking Group said: “We accept the FCA’s findings and apologise to those customers who were impacted. Since 2011 the group has made significant progress to strengthen the business. We are trying to get it right for our customers and to rebuild trust. But we do not get everything right. That means when we make mistakes, we will take responsibility for them. This is what we have done here. The board remains fully committed to ensure everyone at Lloyds Banking Group puts customers at the heart of our business.”
Mr Horta-Osório said: “In 2011 Lloyds led the industry in starting to redress customers who had been mis-sold PPI. We did this because we believed it was the right thing to do. When we began the remediation programme, it was thought this would cost the entire industry around £4.5 billion. To date the industry has set aside over £26 billion for PPI redress with the consequent impact on operational complexity and the significant administrative resources required.
“Whilst our intentions were right, we made mistakes in our handling of some PPI complaints. I am very sorry for this. We have been working hard with the FCA to ensure all customers receive appropriate redress. That process is now substantially complete. We remain fully committed to improving our operational procedures and ensuring we do the right thing for our customers.”
Martin Dodd, customer services director at Lloyds, said: “We have worked hard with the FCA to address our operational mistakes and to ensure customers haven’t lost out. We have subsequently had our complaints handling process quality assured by an independent third party. Once we understood the issue we reviewed our processes and procedures and began to remediate all impacted customers.
“Whilst during this period we continued to uphold and pay redress to around 63 per cent of customers who had a PPI product, it has meant re-reviewing all other cases against our new policy and paying back customers where appropriate. To date we have fully reviewed over 4.8 million PPI complaints, of which over 1.6 million had no PPI policy and have built a system with 7000 people processing these across multiple sites.”