|Lloyds bank fined for ‘grand in your hand’ bonus-induced mis-selling scandal
British regulators have fined state-rescued Lloyds Banking Group a record £28 million after finding staff were at risk of selling unsuitable products amid the lure of bonuses, they announced.
The Financial Conduct Authority said the fine, equivalent to US$46 million or 33.5 million euros, was the biggest ever imposed by the newly created regulator, or by its predecessor, for “retail conduct failings.’’
The failings affected branches of Lloyds TSB, Bank of Scotland and Halifax – all of which are part of Lloyds Banking Group – the lender that is 33-percent owned by the taxpayer after a government bailout, AFP reports.
The FCA said the lenders had agreed to “carry out a review of higher risk advisers' sales and pay redress where unsuitable sales took place.’’
It added in a statement: “The incentive schemes led to a serious risk that sales staff were put under pressure to hit targets to get a bonus or avoid being demoted, rather than focus on what consumers may need or want.''
“In one instance an adviser sold protection products to himself, his wife and a colleague to prevent himself from being demoted,'' it added.
Tracey McDermott, the FCA's director of enforcement and financial crime, said 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 incentivize their staff to do the opposite.''
At Lloyds TSB, staff could receive a “champagne bonus,’’ or 35 percent of their monthly salary by reaching a sales target.
Meanwhile, advisers at Halifax and Bank of Scotland were given a chance to win a one-off payment of £1,000, or “grand in your hand,’’ for meeting a certain target.
The FCA's investigation focused on advised sales of financial products between 2010 and early 2012.
“While advisers were required to meet certain competency standards to be eligible for promotions and bonuses, this control was seriously flawed,'' the regulator said.
“Seven out of ten advisers at Lloyds TSB and three out of ten at Halifax still received their monthly bonus even though a high proportion of sales were found – by the firms themselves – to be unsuitable or potentially unsuitable,'' the FCA added.