In the largest fine ever imposed by the FCA, or its predecessor the FSA, for retail conduct failings Lloyds Banking Group has been fined £28,038,844.

Branches of Lloyds TSB, the Bank of Scotland and Halifax (part of Bank of Scotland) are found to have failed in their controls over sales incentive schemes. These failings concerning investments, ISAs and insurance products, “…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” said the FCA.

Lloyds TSB Bank plc was fined £16,407,343 and Bank of Scotland plc £11,631,501.

The fine had also been increased by ten percent because:

• The previous regulator, the FSA, had warned about the use of poorly managed incentive schemes over a number of years;


• The firms’ previous disciplinary record, including an FSA fine on Lloyds TSB Bank plc for the unsuitable sale of bonds in 2003 caused in part by the general pressure to meet sales targets.

Tracey McDermott, the FCA’s director of enforcement and financial crime, commented:

Lloyds Horse"The findings do not make pleasant reading.  Financial incentive schemes are an important indicator of what management values and a key influence on the culture of the organisation, so they must be designed with the customer at the heart. The review of incentive schemes that we published last year makes it quite clear that this is something to which we expect all firms to adhere. 

"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 incentivise their staff to do the opposite.

"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 ten per cent.

"Both Lloyds TSB and Bank of Scotland have made substantial changes, and the reviews of sales and the redress now being made should right many of these wrongs."

In response Which? executive director, Richard Lloyd, said:

"It's right that in this case the Financial Conduct Authority is taking strong action by imposing their largest fine. This should send a clear message to the banking industry that mis-selling won't be tolerated and that customers, not sales, must come first.

"We now need to see the new professional banking standards body deliver a big change in banking culture across the industry, so that front line staff and their managers are not incentivised to sell products that customers don't want or need."

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