Lloyds becomes the first bank to strip executives of bonuses as it takes back £2m from senior management

• Former chief executive and four other previous directors targeted
• Move will prompt calls for other banks to follow suit

Daily Mail, by Ruth Sunderland, 20th February 2012 

Clawback: The move is understood
to come on the orders of Lloyds chief
 executive Antonio Horta Osorio (pictured)

Lloyds Banking Group has become the first bank to strip executives of part of their bonuses since the start of the financial crisis.

In total 13 executives will lose some of their bonuses for 2010 in the wake of the scandal over payment protection.

The bailed-out bank is to take back a combined total close to £2m from its former chief executive Eric Daniels, along with four other current and previous senior directors who will lose sums of up to £262,50.

A further eight executives, below board level, will be stripped of 5 per cent of their bonus awards of around £100,000 each, the state-backed bank added.

The move will prompt calls for other banks to follow suit.

It is understood to come on the orders of Lloyds chief executive Antonio Horta Osorio.

Earlier this year he volunteered to give up his bonus of up to £2.4 million because he had taken a leave of absence due to exhaustion and felt bosses’ rewards ought to reflect hardships suffered by customers during the downturn.

The clawbacks have been imposed due to Lloyds’ involvement in the payment protection insurance (PPI) mis-selling scandal.

Daniels will lose 40 per cent or £580,000 £1.45m bonus for last year. The 60 year old former chief left the bank in March 2011 but remained on the payroll until the following September receiving £100,000 a month, although he did no work for his erstwhile employer.

The PPI scandal was one of the biggest of its kind in recent years.

More...

• So when will we get our money back? Lloyds and RBS expected to report losses of £4bnlast year
• It wasn't such a sacrifice after all: RBS chief Stephen Hester gets £600k shares windfallweeks after giving up £1m bonus

Customers were sold insurance policies when they took out loans that were meant to cover repayments if they fell sick or lost their job.

The products were extremely lucrative for the banks but often turned out to be of dubious value to consumers. Lloyds last year said it would have to write off £3.2 billion to cover the cost of redress.

PPI scandal: Lloyds last year said it would have to write off £3.2 billion
to cover the cost of redress

Sacrifice: Eric Daniels (left) and Helen Weir (right) are among the
executives targeted in the clawback

City watchdog the Financial Services Authority called on the banks to reflect the seriousness of the scandal in executive pay-packets. Horta Osorio was not at Lloyds at the time of the mis-selling.

The other bosses who face a clawback are departing finance chief Tim Tookey, who will sacrifice £235,000 of his £942,000 payout; Helen Weir, the former head of the retail bank, who will lose £218,000 from her bonus of £875,000 award; wholesale banking boss Truett Tate, who retires this month and will have £260,000 of his £1.05 million bonus clawed back and former head of risk Carol Sergeant.

The pay and bonus of Ms Sergeant, who held a senior position at the Financial Services Authority prior to joining the bank is not disclosed as she was not a board director.

The bank is able to claw back the bonuses because they were awarded in shares to be released over three years so it will simply not pay out the full awards.

So far others have fought shy of clawbacks for fear disgruntled bosses may mount legal challenges.

Lloyds is expected to reveal losses of around £3.5 billion when it issues its full year results for 2011 later this week. Taxpayers own a 41 per cent stake following a £20bn government bailout.

Fellow state-backed bank Royal Bank of Scotland has set aside £850million to cover PPI claims. Its boss Stephen Hester succumbed to pressure to give up his £963,000 bonus after a public outcry, but there are now likely to be fresh demands for further clawbacks on previous bonus awards because of PPI.

Related Article:

Lloyds bank claws back £1.5m bonuses from directors