Lloyds Banking Group said Monday that it will claw back the bonuses of several top executives following a judicial review of improper insurance sales, which resulted in the UK bank handing over hefty compensation to customers.
Lloyds is reducing 40 percent of the £1.45 million ($2.3 million) award paid to former chief executive Eric Daniels. Four other directors will have their bonuses cut by 25 percent, and a five percent cut will apply to the bonuses of all members of the Group Executive Committee and others, Lloyds said.
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The government-backed bank said the reduction, which applies to 2010 bonuses, so far affected 13 employees.
Last year, Britain's financial regulator, the Financial Services Authority (FSA), put pressure on banks to compensate consumers who bought payment protection insurance (PPI).
PPI often was sold alongside loans to insure the borrower could continue repayments if he or she lost their job or became ill. UK consumer groups alleged that the insurance was sold improperly to many consumers who did not qualify or were not even aware that they purchased the insurance. In April last year, a UK court said that customers could demand compensation.
Lloyds subsequently said it set aside £3.2 billion to compensate consumers who were improperly sold the insurance. Other banks followed suit, and an estimated £6 billion has been set aside to cover eventual claims.
Lloyds also said Monday that the 2011 bonus pool will reflect a further reduction in respect of the provision.
Sky News reported that the bank will announce additional bonus clawbacks for 2011 when it reports earnings Friday.
The company insisted that the decision was based entirely on the principle of "accountability" and in no way was related to "culpability or wrongdoing" by the individuals concerned.
Shares in Lloyds were up 3.5 percent in London around 2:00pm local time, outpacing a 0.7 percent increase on the FTSE 100 index.