Lloyds Banking Group has docked £350,000 from the bonus of its boss António Horta-Osório after being hit with a £117m fine for unacceptable handling of compensation claims for payment protection insurance.
Horta-Osório apologised as the 19% taxpayer-owned bank was forced to review complaints by 1.2 million customers after the Financial Conduct Authority found that Lloyds failed to treat customers fairly between 5 March 2012 and 28 May 2013. He could still be in line for a £4m payout.
The record fine is based on the number of customers affected by the bank’s approach to handling PPI complaints. The industry has already set aside £25bn as a result of the mis-selling scandal, and Lloyds has the biggest single bill of £12bn, some £710m of which is related to the FCA action.
“Whilst our intentions were right, we made mistakes in our handling of some PPI complaints. I am very sorry for this,” said Horta-Osório, whose pay packet in 2014 was £11.5m.
In anticipation of the penalty by the FCA, the bank announced in February that it had frozen deferred bonuses from 2012 and 2013 for its executive team. A total of £2.65m bonuses are being permanently withheld, which means that millions more of bonuses will still be handed out to the top management team. The bonus pool for the entire staff has been cut by £30m.
The £350,000 being withheld from Horta-Osório is approximately 12% of the portion of his bonus relating to the period covered by the FCA fine.
The average being withheld from the dozen or so members of the executive committee is around 25%. Even so, an estimated £10m of shares for 2012 and 2013 bonuses have already been released.
Georgina Philippou, acting director of enforcement and market oversight at the FCA said PPI complaint handling a high priority.
“If trust in financial services is going to be restored following the widespread mis-selling of PPI, then customers need to be confident that their complaints will be treated fairly. The size of the fine today reflects the fact that so many complaints were mishandled by Lloyds. Customers who had already been treated unfairly once by being mis-sold PPI were treated unfairly a second time and denied the redress they were owed. Lloyds’ conduct was unacceptable.”
The fine follows a change of policy introduced by Lloyds in March 2012 which was based on an internal policy known as Lighthouse, also referred to as the “over riding principle”. Under this policy Lloyds told its 7,000 complaint handlers to assume that its sales process of PPI were “compliant and robust” unless told otherwise.
Internal documents showed that as soon as the policy was introduced there was a fall in the number of complaints upheld and by 10% on the first day. But a review by the FCA in November 2012 found that the bank had unfairly rejected 57% of the complaints.
The bank was the first to start paying out claims for PPI in March 2011, and it has had difficulties in tackling the deluge of complaints, which at its peak were running at more than 60,000 a week. In 2013, the FCA fined Lloyds £4.3m for delays in making compensation payments to up to 140,000 customers
This article was written by Jill Treanor, for theguardian.com on Friday 5th June 2015 08.30 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010