How bad would Lloyds Banking Group’s failings in handling PPI claims have to be for the executives to lose all their relevant bonuses?
The question is worth asking because the bank had withheld deferred bonus awards from 2012 and 2013 until this latest regulatory investigation was complete. The thinking, we assumed, was that all those awards were at risk if the Financial Conduct Authority’s verdict turned out to be damning.
Friday’s document would seem to fit the bill as a humdinger. Lloyds’ behaviour is described as unacceptable. Some 326,000 customers were initially denied compensation they should have received. The £117m fine is the largest, by far, the FCA has imposed for this offence. The bank was a repeat offender.
Yet you would hardly say Lloyds’ degree of bonus-docking is similarly fierce. The chief executive, António Horta-Osório, recipient of a £11.5m pay package last year, will lose £350,000 from the £2.9m earmarked for him from the 2012/2013 collection. That’s a 12% deduction. Other executives will lose between 8% and 32% depending on how close they were to the PPI action.
As for the £30m reduction from this year’s wider bonus pool, context is everything. Last year’s pool was worth £365m and this year’s is very likely to be larger.
It’s accountability of a sort, and Lloyds might argue that the FCA reckoned these were “level three” offences on a scale that extends to five. But that’s hardly a strong plea of mitigation – level five seems to require full-on forgery of documentation. Lloyds executives should count themselves lucky. The principle of accountability has been acknowledged, but its application won’t hurt much.
This article was written by Nils Pratley, for theguardian.com on Friday 5th June 2015 15.35 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010