Lloyds gets its clawbacks out

The bank says it's planning to take about £2m back from current and former execs as recompense for the mis-selling of payment protection insurance.

by Emma Haslett
Last Updated: 24 Feb 2012
Majority taxpayer-owned bank Lloyds has announced that it’s planning to ‘claw back’ around £2m worth of bonuses from 10 of its executives (four of whom were board members), including its former CEO, Eric Daniels. It’s interesting, because the fug surrounding that other state-owned bank RBS and its CEO Stephen Hester’s bonus has barely cleared – but this time, it’s different. Because while Hester was pressured into giving up his bonus last month because it was felt the bank’s performance wasn’t quite up to scratch, Lloyds’ reason is altogether more solid: the mis-selling of Payment Protection Insurance. Which is, at the very least, a refreshing deviation from the norm.

Of those affected, Daniels stands to lose the most – apparently, he’ll be forced to give back between 40% and 50% of the £1.45m bonus he received in 2010, which works out at somewhere between £600,000 and £700,000. Three directors will lose about £250,000, while six executives below board-level will miss out on £100,000 each. So look out for the odd yacht posted on Gumtree over the next few weeks. £100,000 ONO…

The idea of bonus ‘clawbacks’ was first mooted by the Financial Services Authority in 2009, but this is the first time a British bank has actually put it into practice. Serendipitous timing, really, when you consider quite how contentious bankers’ bonuses are at the moment. Although it’s worth pointing out that Lloyds mentioned more than a year ago that it would try to get back some of what it had paid to executives after the PPI scandal. And the amount it’ll recover is a mere fraction of the £3.2bn it’s set aside for compensation.

Will other banks follow suit? Perhaps: Lloyds has, after all, been rather forward-thinking on both the bonus and PPI fronts. It was the first bank to break rank and promise to refund its customers after the PPI scandal. And in January, CEO Antonio Horta-Osorio turned down his annual bonus for 2011 – just weeks before RBS’s Hester followed suit. So you never know.

But the question now is whether the clawbacks will be extended from legal wrongdoing (in the case of PPI) to simply poor performance. To be honest, it’s unlikely. Lloyds is due to announce its annual results on Friday, and word on the street is that it’ll announce losses of about £3.5bn – just over the amount it’s set aside for PPI compensation. Admittedly, the £2m-odd it’ll recover from ex-execs won’t do much to make up those losses – but the bank’s leaders are hoping that the message from this will be clear: should anyone consider taking similar actions in the future, think again.

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