News

The UK Financial Conduct Authority has fined Lloyds TSB Bank and Bank of Scotland, both part of Lloyds Banking Group, £28,038,844 for serious failings in their controls over sales incentive schemes.

This is the largest ever fine imposed by the FCA for retail conduct failings.

The FCA carried out a review of incentive schemes last year after numerous warnings to the industry, and in particular to Lloyds Banking Group, about the importance of managing incentive schemes. They found that 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.

Tracey McDermott, the FCA’s director of enforcement and financial crime, commented that the review makes it quite clear that this is something to which the FCA expects all firms to adhere. Customers have a right to expect better from leading financial institutions and the FCA expects firms to put customers first – but firms will never be able to do this if they incentivise their staff to do the opposite.

Dominic Hook, UNI Europa Finance Vice President and Unite the union national officer said: "Despite the countless reports and investigations into the conduct of the banks, the industry clearly has not learned the lessons of the financial crisis nor heard the concerns of customers and staff in order to adequately change. The £28m fine imposed by the FCA today is an illustration of the overdue changes needed. The target driven sales culture, where the performance of ordinary bank workers is judged on achieving sales targets, rather than meeting the needs of customers, is unsustainable and could lead to another mis-selling scandal. For too long there has been a link between pay and sales at the retail banks. Staff must reach unachievable sales targets to qualify for their often small annual bonus payment. Sales bonuses for customer facing staff must be abolished and replaced with rewards for good customer service."

The FCA expects all financial incentive schemes to be designed carefully with good customer outcomes in mind, and the risks they pose must be identified and managed properly.

For more information, please see the FCA Final Notice 2013: Lloyds TSB Bank plc and Bank of Scotland plc.