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Lloyds Bank to strip bankers of £1m in bonuses

The bank is to strip several existing and former senior bankers of more than $1 million in bonuses over their roles in mis-selling payment protection insurance.

LLOYDS BANKING GROUP has announced it is to strip several existing and former senior bankers of more than £1 million (€1.2 million) in bonuses over their roles in mis-selling payment protection insurance (PPI).

It will be the first time a British bank will exercise a “clawback” option regarding executive pay, according to the Daily Telegraph. The bank’s former chief executive, Eric Daniels, is amongst those facing the adjustment.

The scandal cost the state-owned bank billions last year – after the British High Court ruled the bank could not stop customers who felt they had been mis-sold the product from seeking compensation. Lloyds subsequently put €3.2 billion aside to cover likely payouts, Reuters reports.

What is PPI?

PPI is an insurance product that is intended to cover outstanding debts, typically in the form of a loan or an overdraft. It was often sold alongside loans to cover a customer’s repayments if they became ill or unemployed.

In the 2009/2010 financial year, the number of new PPI complaints from customers to the British financial services ombudsman rose by 58 per cent – with some customers saying they were unaware they even had the insurance.

That year, the ombudsman reported a high volume of complaints involving policies that were paid for with a single premium, where the up-front cost was added to an unsecured or second-charge loan. It also said it was continuing to see “a significant number of cases relating to payment protection insurance sold alongside credit cards”.

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Royal Bank of Scotland

It is thought the move by Lloyds could spark similar behaviour by other bailed-out banks. Royal Bank of Scotland, which is 83 per cent owned by the taxpayer, was the second-largest mis-seller of PPI in the country.

Both banks are due to publish their 2011 results this week – and both are expected to be loss-making, the Guardian reports. Details of executive pay expected to follow within the month.

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