London - Lloyds will slash the bonuses of its former chief executive and 12 other leading members of staff, following an insurance mis-selling debacle at the part-nationalised British bank.
The bank, which is 40% owned by the government after a state bailout, said on Monday it would reduce the 2010 bonus awards to take into account a £3.2bn provision it made last year over mis-sold payment protection insurance (PPI).
Lloyds’ decision to cut the bonuses marks the first time that a British bank has exercised a “clawback” option on executive pay packages since the 2008 financial crisis. It also follows renewed scrutiny from politicians and the general public over bankers’ bonuses.
Last month, Lloyds CEO Antonio Horta-Osorio, who replaced Eric Daniels in 2011, waived his bonus after taking time off work on sick leave. The chairperson and chief executive of rival part-nationalised lender Royal Bank of Scotland also decided against accepting their bonus payments following intervention from major political parties.
Lloyds said on Monday it would cut the bonuses due to be paid out in deferred shares by 40% for former chief executive Daniels, by 25% for four other directors, and by 5% for the others.
Many people remain angered by the fact that a profession which was held responsible for having caused the financial crisis still awards large salaries, while elsewhere thousands lose their jobs in a weakening global economy.
Lloyds did not disclose the identities of the other bankers whose bonuses would be cut, but British media reports said those included outgoing finance director Tim Tookey, former retail banking boss Helen Weir, former head of risk Carol Sergeant and Truett Tate, who is due to retire from the group this month.
PPI insurance policies were typically taken out alongside a personal loan or mortgage to cover repayment if the borrower was unable to pay due to unemployment, sickness or accident.
But the policies were often mis-sold to self-employed or unemployed people who would not have been able to claim.
They were also mis-sold to consumers who did not realise they were taking out such a policy and a court ruled that the banks were at fault.
Last May Lloyds, Barclays, HSBC and RBS unveiled more than £5bn of charges to cover compensation for PPI mis-selling, with Lloyds leading the way with its £3.2bn provision.
Former CEO Daniels had a basic salary of £1.04m for 2010. He had been due a performace-related bonus of £1.45m, but this will now be cut by 40% or £580 000.
Tate had been due a bonus of £1.05m, while Tookey and Weir had been due bonuses of £942 000 and £875 000 respectively.