Lloyds claws back executive banker bonuses

Posted:

20 February 2012

by Luke Thomas

£2 million in banking bonuses is to be clawed back from ten executives at Lloyds Banking Group, as a means of penalising them for their role in the mis-sold PPI (Payment Protection Insurance) scandal which rocked the financial world when it came to light several years ago.

Eric Daniels, who is Lloyds former chief executive, is expected to have between £600,000 and £700,000 docked from his bonus of £1.45m. Three of the other board directors who were involved will likely face losses of £250,000 each, in addition to six further executives who are expected to lose approximately £100,000 per person.

The clawback is an unprecedented response to a disappointing fiscal year for the banking group, and resulted from new regulations put in place after the 2008 banking fiasco. The Financial Services Authority were noted to have put pressure on the banks to prepare for eventualities of this nature.

Much of the loss that Lloyds has suffered is due to the necessity for them to set aside a fund to compensate those customers to whom they mis-sold a vast amount of PPI policies, before this scandal came to light and the banks were held responsible for their wrongdoing by being forced to pay out.

PPI, or Payment Protection Insurance, is a form of coverage which pays out where an individual finds themselves unable to keep up repayments on the loan to which it is attached due to an unexpected loss of income, due to such unforeseen circumstances as illness or the loss of their job.

However, the policies were sold to a great number of borrowers who were in a position where the PPI could never successfully pay out, and were essentially misled into paying for a worthless insurance policy.

It is hoped that the ability to claw back bonuses from executives will result in more caution by the banks in future.