Lloyds banking group hit with record fine over sales bonuses

Investing.com - The U.K. Financial Conduct Authority fined Lloyds Banking Group a record GBP28 million on Wednesday, for "serious failings" in relation to how bonuses were awarded to sales staff.

The fine came after the FCA conducted a review into sales practices between January 2010 and March 2012.

Lloyds TSB offered some staff a "champagne bonus" of 35% of their monthly salary if they hit their sales targets, while Halifax and the Bank of Scotland offered a one-off payments of GBP1,000 for meeting sales targets.

If sales staff failed to reach their targets they risked being demoted or having their pay cut by as much as half.

The FCA said it found “a significant risk that advisers would be improperly motivated by their own personal financial circumstances and goals to sell products to customers.”

"The findings do not make pleasant reading," said Tracey McDermott, the FCA's director of enforcement and financial crime.

"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," Ms. McDermott said.

"Because there have been numerous warnings to the industry about the importance of managing incentives schemes, and because Lloyds TSB had been fined in 2003 for unsuitable sales of bonds, we have increased the fine by 10%," she added.

The FCA said both Lloyds and the Bank of Scotland had made "substantial changes" since the review and many of the wrongs have been rectified.

A spokesperson for Lloyds said the banking group accepted the regulators findings and added that the bank would compensate any customers who were affected.

"The group recognizes that its oversight of these particular schemes during the period in question was inadequate and apologizes to its customers for the impact that they may have had,” the bank said.