Decision by Lloyds Banking Group follows £3.2bn losses suffered by bailed-out bank after payouts were awarded
Jill Treanor – Monday 20 February 2012
http://www.guardian.co.uk/business/2012/feb/20/lloyds-seize-bonuses-senior-bankers
Lloyds Banking Group is to announce that it intends to “claw back” bonuses from as many as 10 senior bankers because of the £3.2bn losses that the bailed-out bank suffered after the payouts were awarded a year ago.
Between 40% and 50% of the bonus pot is thought to be at risk. Details were still being finalised on Sunday night and the figure could drop as low as 25% – which may not satisfy some critics who will question why any bonuses should be paid out at all after the bank took the losses to cover the misselling of payment protection insurance (PPI).
Among those facing the consequences of the adjustment of the bonus pot caused by the PPI scandal are the former chief executive Eric Daniel and his closest lieutenants, some of whom have left the bank since his departure a year ago.
Lloyds would not comment on Sunday night, but the chairman, Sir Win Bischoff, acknowledged at the bank’s annual meeting in May that a clawback was being considered by the bank.
“The implications on compensation are being considered by the remuneration committee and will be determined by the board in due course,” he told shareholders when asked about the implications of the PPI provision.
In February 2011 Daniels was awarded a £1.45m bonus for his work in 2010 as he announced that the bank had returned to profitability following its controversial rescue of HBOS.
But just weeks after he left, his successor, António Horta-Osório, announced that the bank would need to take the hit for the misselling of PPI, which is intended to keep paying off loans in the event of illness or job loss but often failed to live up to its promises.
Lloyds is not alone in having to take a provision for the misselling of PPI, but it took the biggest hit in the industry, which has collectively been saddled with a bill of more than £6bn.
Among the other Lloyds bankers thought to be facing financial penalties for the losses that the bank will have to report for 2011 are Helen Weir, the former head of the retail banking arm, who was last week named as the new finance director of John Lewis. She received a bonus of £875,000 for 2010.
Others are said to include Tim Tookey – the outgoing finance director, who is due to present the bank’s 2011 losses to the City on Friday – and Truett Tate, the head of corporate banking, who is already facing controversy over a one-year payment he is contractually entitled to when he leaves in May. Tookey was awarded a bonus of £942,000 and Tate more than £1m.
Other members of the senior management team are also expected to receive lower bonuses than they had been expecting through a process that has not been fully tested since the banking crisis, when regulators demanded that bonuses could be “clawed back” in the event that performance turned sour in the future.
The requirement was made after it emerged that thousands of bankers had walked away with multimillion-pound bonuses in 2007, only for their banks to report huge losses the following years.
When Daniels was awarded the bonus – which was 63.3% of his maximum potential payout – in February 2011, it was deferred for three years, which means he has not yet received the money, in the form of shares.
Other banks will also face questions about whether they are able to claw back bonuses for the losses they suffered as a result of PPI provisions, which none of the major players have been able to escape.
Both bailed-out banks, Lloyds and Royal Bank of Scotland, are due to publish their 2011 results this week, and both are expected to be loss-making some three years after the October 2008 crisis. Details of executive pay are usually published up to three weeks later in the annual reports to shareholders.
