5th Jun 2015 06:31
LONDON (Alliance News) - Lloyds Banking Group PLC Friday took action on bonuses for its executives after being fined GBP117 million by UK regulators over the way it handled complaints relating to the payment protection insurance mis-selling scandal.
According to the UK's Financial Conduct Authority, the fine was the largest retail fine that it has ever issued.
In a statement Friday, Lloyds said awarded but unvested bonuses amounting to about GBP2.65 million in total will be forfeited by executives, while its Remuneration Committee has decided to cut the bonus pool for 2015 by about GBP30 million.
Lloyds said it has now reviewed all customer complaints between March 2012 and May 2013, the period during which it made mistakes over the way it handled complaints. The FCA said that Lloyds assessed complaints over 2.3 million PPI policies in that time, rejecting 37% of them.
The FCA said guidance issued by Lloyds instructed complaint handlers that the "overriding principle" when assessing complaints was that sales processes in connection with the product were "compliant and robust unless told otherwise". In addition, the regulator said, Lloyds didn't tell complaint handlers of known failings in its PPI sales processes.
The result was that some complaint handlers used the "overriding principle" to dismiss customers' personal accounts as to what happened during a sale of the product or to not fully investigate complaints. Lloyds has now removed the "overriding principle" from its process for handling PPI complaints.
"PPI complaint handling is a high priority issue for the FCA. If trust in financial services is going to be restored following the widespread mis-selling of PPI, then customers need to be confident that their complaints will be treated fairly," Georgina Philippou, acting director of enforcement and market oversight at the FCA, said in a statement Friday.
"The size of the fine today reflects the fact that so many complaints were mishandled by Lloyds. Customers who had already been treated unfairly once by being mis-sold PPI were treated unfairly a second time and denied the redress they were owed. Lloyds? conduct was unacceptable," Philippou said.
Lloyds said Friday it had needed a "clear and simple approach" to make sure customers were treated fairly as complaints mounted to "unprecedented" levels and the bank aimed to act within regulatory timescales.
"As part of the broader complaint handling process complaint handlers were guided to assume that our PPI sales processes were compliant unless they were notified to the contrary. We did not do enough to tell complaint handlers where they should not rely on this assumption," Lloyds said in a statement.
The fine highlights the costliness of the PPI scandal to the banking sector.
The lender's results for the first-quarter marked a rare break from the scandal, with Lloyds deciding that it didn't need to top-up its provision for compensating customers who were mis-sold the product. However, Chief Financial Officer George Culmer had said that risks of further costs remain.
Lloyds' provisions for compensation and administration relating to PPI have reached GBP12.03 billion, a considerable chunk of the overall bill of more than GBP26 billion for the industry as a whole in the UK.
"We accept the FCA's findings and apologise to those customers who were impacted. Since 2011 the group has made significant progress to strengthen the business. We are trying to get it right for our customers and to rebuild trust. But we do not get everything right. That means when we make mistakes, we will take responsibility for them. This is what we have done here. The board remains fully committed to ensure everyone at Lloyds Banking Group puts customers at the heart of our business," Lloyds Chairman Lord Blackwell said in a statement Friday.
Lloyds would have received a GBP167.8 million fine but was given a 30% discount as it agreed to settle at an early stage of the regulator's investigation.
By Samuel Agini; [email protected]; @samuelagini
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