Lloyds bank fined record £28m for 'serious failings'

Lloyds staff "are not supposed to be salespeople," says FCA director Tracey McDermott

Related Stories

Lloyds Banking Group has been fined £28m for "serious failings" in relation to bonus schemes for sales staff.

The Financial Conduct Authority said it was the largest fine that it or the former Financial Services Authority had imposed for retail conduct failings.

The bonus scheme pressurised staff to hit sales targets or risk being demoted and have their pay cut, the FCA said.

Lloyds Bank has accepted the regulator's findings and apologised to its customers.

"The findings do not make pleasant reading," said FCA director Tracey McDermott.

Analysis

There was a grim atmosphere in some Lloyds, Halifax and Bank of Scotland branches, as staff tried to avoid being demoted and having their pay cut for failing to meet sales targets.

"I left just before I was likely to have had a breakdown," one staff member told the BBC.

Another reported that "The only thing that matters is hitting sales numbers, not the customer."

And one who lost his job said: "I can only describe my nine months in a branch as a disgrace."

Lloyds has embarked on a trawl of sales to 692,000 customers to see how many may have lost out.

About 11,000 cases are being prioritised - cases where the behaviour of advisers seemed to be most questionable.

There are suggestions that Lloyds may have set aside as much as £100m to cover compensation for failings including the ones highlighted today.

The fine could have been £35m had Lloyds not agreed to settle early, the FCA said.

Lloyds has already set aside £8bn for mis-selling loan insurance and £400m for mis-selling interest rate swaps. And in 2003 it was fined £1.9m and handed a £100m compensation bill by the Financial Services Authority for mis-selling so-called "precipice bonds".

Richard Lloyd, executive director of consumer organisation Which?, said: "This should send a clear message to the banking industry that mis-selling won't be tolerated and that customers, not sales, must come first."

He called for the FCA to deliver "a big change in banking culture across the industry".

'Champagne bonus'

"In one instance, an adviser sold protection products to himself, his wife and a colleague to prevent himself from being demoted," the FCA said.

The FCA said the failings affected branches of Lloyds TSB, Bank of Scotland (BoS) and Halifax and involved the sale of individual savings accounts and income protection insurance products between 2010 and 2012.

More than one million products were sold to nearly 700,000 customers over the period.

Lloyds TSB offered some staff a "champagne bonus" of 35% of their monthly salary if they met sales targets, while Halifax and BoS offered monthly "grand in your hand" bonuses.

Start Quote

Although Lloyds behaved in a way regarded by the regulator as thoroughly reprehensible... those customers generally aren't out of pocket”

End Quote

But the FCA found that more than 200 Lloyds TSB sales advisers received bonuses even though all their sales were unsuitable or potentially unsuitable.

"Customers have a right to expect better from our leading financial institutions and we expect firms to put customers first - but firms will never be able to do this if they incentivise their staff to do the opposite," said Ms McDermott.

"Because there have been numerous warnings to the industry about the importance of managing incentives schemes, and because Lloyds TSB had been fined in 2003 for unsuitable sales of bonds, we have increased the fine by 10%," she added.

Wrongs righted

The FCA said both Lloyds and Bank of Scotland had since made "substantial changes" and that many of the wrongs were now being righted.

The firms had agreed to review sales of investment products by financial advisers and "pay redress where unsuitable sales took place", it added.

Accepting the FCA's findings, Lloyds Banking Group said in a statement: "The group recognises that its oversight of these particular schemes during the period in question was inadequate and apologises to its customers for the impact that they may have had.

"We are determined to ensure that any customer impacts are dealt with quickly and fully."

The statement added that the bank did not expect there to be any "material financial consequences" as a result of the fine and potential compensation to customers.

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

Business Live

  1.  
    Treasury Committee Via Twitter Mark Broad Economics reporter, BBC News

    Carney criticises Lord Grabiner's manner in evidence to Select Comm - Grabiner was author of the report into FX conduct of Bank of England.

     
  2.  
    12:30: Barclays results
    Frances O'Grady

    TUC general secretary Frances O'Grady is not impressed with Antony Jenkins' bumper pay package for 2014, particularly given the provisions it has made for potential fines. "It is hard to have a positive view of any organisation that pays its boss £5.5m in a single year - a sum that would take a full-time worker on the minimum wage 465 years to earn," she says.

     
  3.  
    12:13: Market update

    After earlier gains, the FTSE 100 share index in London fell 6.39 points to 6,934.25. In Frankfurt, the Dax has followed the same pattern, down 7.4 points to 11,402.9. The Cac in Paris slipped just under 3 points to 4,914.4.

    • Barclays dips 3.3% after unveiling more provisions for PPI and rate-fixing investigations
    • Tullow Oil bounced back 4% after falling 7.7% yesterday on concerns that a boundary dispute between Ivory Coast and Ghana could delay a project off west Africa
     
  4.  
    PPI Via Email Kevin Peachey Personal finance reporter, BBC News

    Barclays today became the latest bank to add to the amount of money set aside for PPI mis-selling cases. The total bill for the top five banks in the UK is now an eye-watering £24.4bn, says consumer group Which?.

     
  5.  
    Fiat-Chrysler Via Email Russell Hotten Business reporter, BBC News
    Sergio Marchionne

    Fiat-Chrysler's boss thinks it is great that Google and Apple are moving into car technology - but it also makes him feel uncomfortable. Sergio Marchionne (pictured here with a Ferrari) said at the Geneva motor show that the industry needs "disruptive interlopers. It's a good thing. But when you're the guy whose life is being disrupted, it's not necessarily a good feeling."

     
  6.  
    11:29: Australian rates
    Sydney

    The Reserve Bank of Australia left interest rates unchanged at 2.25% today after cutting by a quarter of a point in January for the first time in 18 months. Further easing remains on the cards to help drive down the Aussie dollar and drive growth. Greg Gibbs, an RBS analyst, said "unusually clear guidance" meant the RBA is keen to keep a lid on the dollar.

     
  7.  
    Geneva motor show Via Email Russell Hotten Business reporter

    Aston Martin unveils plans to broaden its range of cars to attract younger and female buyers. New sports cars, a four-seater - and a small SUV - are all in the pipeline. The British carmaker may be synonymous with James Bond, but its buyers are frequently middle-aged enthusiasts. "The brand has to be relevant," says boss Andy Palmer. "Less dependent on a narrow portfolio and one type of customer."

     
  8.  
    11:01: Treasury Committee
    Carney

    Mr Habgood says he never thought that the terms of reference for Lord Grabiner's inquiry were restrictive. Mr Carney agrees that the barrister was able to investigate freely and had unlimited resources to do so.

     
  9.  
    10:49: Treasury Committee

    The Bank's internal investigation, led by barrister Lord Grabiner, began in March 2014 following allegations that a senior member of staff had been told of "attempts to move" the foreign exchange market. It resulted in the Bank's chief foreign currency exchange dealer, Martin Mallett, being dismissed in November. Mr Carney told MPs that Mr Mallett was aware of possible misconduct into the forex market but failed to share that information with his superiors: "He did not escalate these issues."

     
  10.  
    10:43: M&A statistics

    The Office for National Statistics says the number of mergers and acquisitions involving UK companies fell to the lowest figure since 1987 last year. "The downward trend of domestic M&A may be a result of UK political instability as UK businesses experienced uncertainties about the outcome of the Scottish referendum, held in September 2014, and the impending general election," the ONS said.

     
  11.  
    10:27: Treasury Committee

    Bank of England governor Mark Carney and chairman of its court, Anthony Habgood, are giving evidence to MPs on the Treasury committee about the Bank's own foreign exchange market investigation. Labour MP John Mann asks how deeply ingrained the concept of a "nod and a wink culture" is at the Bank. Mr Habgood admits there is a need to professionalise the working practices.

     
  12.  
    Via Email Beef ban Simon Atkinson Editor, India Business Report
    Water buffalo

    Bad news for beef farmers - and for those who like a burger. Cows are holy to Hindus - slaughtering the animals was already illegal. But in Maharashtra state, that ban has now been extended to bulls and bullocks. The beef industry here says thousands of jobs in will be lost. Water buffalo (like the pair above) survive though - or rather - don't …. so the beef substitute will still be available.

     
  13.  
    09:54: China trade Radio 5 live
    Shoes

    Parcelforce Worldwide's ales and marketing director, Helen Wylde, was on 5 live earlier talking about sales to China from the UK. Baby milk, children's clothing, shoes, toys, educational books from Britain all sell well in China. The most odd? Bicycles. Chinese buyers like trusted brands.

     
  14.  
    09:37: Construction data
    Pinnacle

    The purchasing managers' index for the construction sector rose 1 point to 60.1 in February, defying expectations for a fall as growth picked up across the housing, commercial and civil engineering sectors. Tim Moore, senior economist at Markit, says some construction companies think the general election outcome could prove a "temporary bump in the road" for new work.

     
  15.  
    09:21: Paddy Power results
    World Cup

    It's a lucky day for Paddy Power investors after the company said it will return €392m cash to shareholders after failing to find any potential bid targets. Operating profit jumped by a better than expected 19% to €163.8m for 2014, helped by last summer's World Cup, which was won by Germany.

     
  16.  
    Barclays results Via Email Chirantan Barua Bernstein Research

    Dividends were held flat for the fourth quarter at 3.5p as compared to last year and came in lower than consensus at 3.7p. Non-progressive nature will be taken as marginally negative and also highlights that the bank's key focus continues to be capital build.

     
  17.  
    08:53: Business Matters World Service
    Royal Enfield

    Can India's cities become cleaner and greener? Business Matters on the World Service is live from Chennai all week. In the first programme Fergus Nicoll asks whether the infrastructure is fit for purpose - and visits an Indian success story with its roots in Britain: Royal Enfield motorcycles. Listen here.

     
  18.  
    08:41: Barclays
    Barclays shares

    Shares in Barclays are down 2.3%, or 6.15p, at 256.6p in morning trading in London. The stock has not moved much over the past 12 months given that it's just 8.7p higher than the price on March 4 last year.

     
  19.  
    08:27: Ford BBC Radio 4
    Ford Mustang

    Jim Farley, Ford's European president, tells presenter Simon Jack on Today that he hopes Britain does not leave the European Union. One in three engines made by the company comes from the UK, which he described as the "centrepiece" of its global enterprise. Asked about the Russian market, Farley said Ford believed in it in the long term but admitted that some short-term adjustments were required because of the volatile economy.

     
  20.  
    08:14: Taylor Wimpey results
    house

    If you're a house builder and you're not making piles of money, then something is very wrong. Fortunately for Taylor Wimpey that is not the case. Annual pre-tax profits are up two thirds to £450m before one-off deductions as 12,454 homes were completed across the UK - 758 more than in 2013 - with an 11.5% rise in average selling price to £213,000.

     
  21.  
    07:56: Barclays results
    Barclays

    While Mr Jenkins takes his first annual bonus with Barclays, the overall 2014 bonus pool for the bank is down £520m to £1.86bn. Most of the total - £1.05bn - goes to the investment bank. Its capital ratio, a measure of strength against unexpected losses, is up to 10.3% from 9.1%.

     
  22.  
    07:44: Barclays results BBC Radio 4
    Jenkins

    Barclays chief Antony Jenkins is on Today. The bank is the healthiest it has been since the financial crisis, he says. Changing culture at the bank takes a long time, Mr Jenkins adds, but the "vast majority" of his 130,000 bankers "want to do the right thing". He is taking a bonus of £1.1m after the "huge amount of progress" the bank has made. Asked about the topic du jour, Mr Jenkins says he pays all his tax in the UK and as a US green card holder.

     
  23.  
    07:37: Barclays results

    Barclays wrote down the value of its education, social housing and local authority loan portfolio by £935m. Last year the portfolio was valued at just less than £16bn, but at that time, the lender reclassified the loans as "level 3" assets. That's City-speak for loans you cannot value easily because they don't sell very often.

     
  24.  
    07:24: Direct Line results
    Direct Line website

    It's been a good 2014 for Direct Line, with pre-tax profits up 12% to £456.8m and a windfall of £430m from the sale of its international business. Shareholders will pocket total dividends of 27.2p per share, up from 20.6p in 2013. Harvey Keitel probably pocked a pretty penny too for featuring in its TV ads.

     
  25.  
    07:16: Barclays results

    Antony Jenkins will take his first bonus as chief executive of the lender: £1.1m. The bank also said it would increase its provision for payment protection insurance (PPI) by £200m for the last three months of 2014, taking the year's total to £1.1bn. Excluding these provisions and other things the bank considers one-offs, pre-tax profit rose 12% to £5.5bn. But including the nasties, the figure sank 21% to £2.26bn.

     
  26.  
    07:03: Barclays results
    bank

    Barclays have posted their 2014 results. They have set aside an extra £750m after those investigations for foreign exchange manipulation, taking the pot to £1.25bn.

     
  27.  
    06:53: Barclays BBC Radio 4
    Barclays

    Chris Wheeler, of Atlantic Equities, has also popped up on Today. He tells Simon Jack that Barclays is doing only "averagely well ... it's still work in progress". He expects pre-tax profits to be about £5.2bn when the bank reports its annual results at 7am.

     
  28.  
    06:35: Markets performance Radio 5 live

    Justin Urquhart-Stewart of 7 Investments is still on 5 live. "We are dealing with companies that make a profit and make things," he says of the Nasdaq's rally. The dotcom boom was based on companies that failed to make money, although "we have to be wary" because markets in 2015 are gorged on cheap money and cheap debt.

     
  29.  
    06:23: Barclays results Radio 5 live

    Chris Wheeler of Atlantic Equities is talking about Barclays. £5.2bn pretax profits are on the cards for the bank in its annual results, he estimates - a tad ahead of last year's result. However, "it's the return on equity that counts", he says. The bank is struggling to make 10%, which for a high-risk endeavour like banking is not where you want that figure, Wheeler adds. Results come at 07:00.

     
  30.  
    06:11: Markets performance Radio 5 live

    Justin Urquhart-Stewart of 7 Investments is on 5 live as the markets guest. "You have a global economy in pretty good shape and in the eurozone some better figures," he says, following soaring US markets. The FTSE 100 may grow further if there's better sentiment from China, he adds.

     
  31.  
    06:02: Mobile World Congress Radio 5 live
    Kazuo

    Rory Cellan-Jones, technology correspondent, is in Barcelona at the Mobile World Congress. Sony chief executive Kazuo Hirai is "making some tough decisions" and focusing Sony on things like films and games and camera technology: the areas that make money, he tells 5 live. Like many companies, it's finding mobile phones a tricky market.

     
  32.  
    06:00: Chris Johnston Business reporter

    Get in touch via email bizlivepage@bbc.co.uk or on twitter @BBCBusiness

     
  33.  
    06:00: Howard Mustoe Business reporter

    Good morning! US stocks hit record levels, with both the Dow Jones and the S&P 500 closing at all-time highs and the Nasdaq breaking the 5,000 barrier for the first time in 15 years. Is that going to last? Stay tuned for more.

     

Features

  • Mukesh SinghNo remorse

    Delhi bus rapist says victim shouldn't have fought back


  • Aimen DeanI spied

    The founder member of al-Qaeda who worked for MI6


  • Before and after shotsPerfect body

    Just how reliable are 'before and after' photos?


  • A man shutting his eyes tightlyStrange light show

    What do you see when you close your eyes?


Try our new site and tell us what you think. Learn more
Take me there

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.