Economy
Banking regulator deals Lloyds record £28m fine for irresponsible sales culture
The Financial Conduct Authority (FCA) has dealt Lloyds Banking Group a £28m fine for “serious failings” in its control of sales incentive schemes.
The group was found to have high risk features in its advisers’ financial incentive schemes, which were not properly controlled, according to the FCA. The regulator argued this created significant risk that advisers would sell products to customers that they did not want or need in order to increase their salaries or bonuses.
Tracey McDermott, the FCA’s director of enforcement and financial crime, said the findings do not make for “pleasant reading”.
“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”, she added.
The investigation found that 70% of advisers at Lloyds TSB, now called Lloyds Bank, and 30% at Halifax still received their monthly bonus despite the firm finding that a high proportion of sales were found to be unsuitable or potentially unsuitable. Some employees at the Bank of Scotland, part of Lloyds Banking Group alongside Lloyds Bank and Halifax, were also found to have acted irresponsibly.
Employees were reportedly offered champagne or “grand in your hand” bonuses for hitting sales targets. These incentive schemes created a culture of mis-selling, the FCA added. The regulator said that there was evidence of one member of staff selling protection products to himself and family members in order to avoid being demoted for missing a particular target.
The overall fine was increased by 10% because Lloyds TSB had been fined in 2003 for unsuitable sales on bonds and the previous regulator, the Financial Services Authority, had issued a warning about the use of poorly managed incentive schemes.
Richard Lloyd, executive director of consumer group Which?, said the fine should send a clear message to the banking industry that customers must come first, not sales.
He added, “We now need to see the new professional banking standards body deliver a big change in banking culture across the industry, so that front line staff and their managers are not incentivised to sell products that customers don’t need or want.”
This year, Lloyds Banking Group has faced strong criticisms over mis-selling payment protection insurance and bonuses.
Taxpayers have a 32.7% stake in the group following a £20 billion bailout deal at the height of the 2008 financial crisis. The government sold a 6% stake in the bank in September, bringing in a profit of £61m.
Further reading:
Lloyds Bank sells remaining stake in St James’s Place
Aberdeen signs deal to buy SWIP from Lloyds Banking Group
Lloyds Bank sets aside further £750m for PPI claims
Treasury sells 6% of Lloyds stake, raking in £61m profit for taxpayer
Customers urged to ditch Lloyds after bank admits ‘issues’ with PPI claims
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