The Lloyds Banking Group, has been proven guilty and needs to pay a fine of £117M GBP. This is due to the allegations that this corporate body has not appropriately handled the compensation dividends for selling Payment Protection Insurance (PPI) in a way not profound to their customers.
The penalty has been announced on June 5th, 2015. This comes at a time when the government is making the necessary arrangements to sell shares of the bailed out bank to private investors. It is said that The Lloyds Banking Group CEO, António Mota de Sousa Horta Osório had received an £11.5M GBP pay deal in 2014.
The Lloyds Banking Group has decided to restrict withdrawals and exchange of bonuses that had been carried forward from 2012 and 2013. It is estimated that about £15M GBP shares for about twelve executives is thought to have already been issued, authorized and purchased by investors and are currently held by them. It has however not been so clear what percentage of these shares has actually been restricted.
The Lloyds Banking Group CEO, Antonio Horta Osorio has over £4M GBP worth of shares frozen. The Finance Director, George Calmer is also sailing in the same boat. Even Alison Brittain, the outgoing Head of Retail Banking has also had her share awards postponed.
What remains to be seen is whether all these or simply a fraction of them that have been restricted will have to be permanently deducted from the official’s pay check and sent directly to the government.
The Lloyds Banking Group has already lost £25 Billion GBP of cost in its bid to cover the Payment Protection Insurance (PPI) scandal. The fine from the Financial Conduct Authority, would inevitably do so much harm to this banking industry. Both parties have however not been so keen on giving comments about this issue. Furthermore, Lloyds has also had to part with multi-billion pound fines because they had rigged foreign exchange markets, Libor and other markets.
The bank has experienced so much difficulty in trying to handle the ever-growing complaints that sometimes could go as high as 60,000 a week. This is in spite of the fact that this 19% taxpayer owned bank was the first bank to pay out claims for Payment Protection Insurance (PPI) in March 2011.
Lloyds paid a £4.3M Pound fine in 2014 after being charged by Financial Conduct Authority for delaying to make compensation payments to not less than 140,000 customers.
If there is any bank that has made steps to deal with PPI compensation, then it is Lloyds. It set aside £12B since 2011 to start paying out compensations. Before this 2011 move, majority of the banks were grappling with court battles with the Financial Conduct Authority over Payment Protection Insurance; which had at one time profited the banks enormously. PPI was issued just like loans to cover payments in the ugly eventualities of sickness or loss of income. It was however realized that the PPI has been sold to quite a number of customers.
Lloyds rescued HBOS when it was about to sink into oblivion. This made it the largest seller of PPI products, a possible explanation as to why it is now dealing with such a huge fine.
It was in February 2015 that Lloyds admitted the fact that Financial Conduct Authority was already making investigations in the way they were handling PPI claims. They gave assurance to the customers that their complaints were to be addressed efficiently and in a manner that is fair.
Lloyds qualified for a 30% discount since they agreed to settle at an early stage of the investigation. Should Lloyds not have received the discount, the Financial Conduct Authority would have imposed a fine of over £167M GBP.