Finance Matters

Posts Tagged ‘Lloyds’

The Financial Ombudsman Service (FOS) received more complaints about Barclays than any other single UK bank in the second half of 2011, but Lloyds topped the list of most complained about banking groups.

The FOS received a total of 11,524 complaints about Barclays between 1 July and 31 December – 6,975 were about the mis-selling of Payment Protection Insurance (PPI) and 3,474 were about banking and credit.

The FOS ruled in favour of the customer in 84% of the 11,524 complaints made about the bank.

The regulator received 20,310 complaints about Lloyds Banking Group, which includes Lloyd TSB, Halifax, Bank of Scotland, C&G and Birmingham Midshires, while there were 12,273 complaints about Barclay’s group.

However Lloyds Banking Group has 30 million retail customers, significantly more than rival banks.

Lloyds chief executive, António Horta-Osório, said: “I am pleased with the significant achievements we have made in reducing complaints in 2011.

“However, we need to keep improving and so we have set a new target for 2012 when we will aim to have no more than 1.3 complaints per 1,000 accounts.”

A total of 106,193 new complaints were made to the FOS, compared with 150,000 in the 2011 first half, and 46,700 of these concerned PPI.

On average the FOS received 580 complaints each day from customers who are dissatisfied with their banks, an increase of 41 per cent from 2010.

In related news, Barclays has promised to comply with the government’s decision to close two tax loopholes it exploited.

The law has been changed retrospectively to close the loopholes, which could have allowed Barclays to avoid paying around £500m in tax, according to The Treasury’s estimate.

However Barclays disagrees with this estimate and claims the figure is nearer £200m.

Royal Bank of Scotland made a loss of nearly £2 billion last year but still paid out £785 million in bonuses to staff, including £390 million to investment bankers.

The average bonus per group employee was £5,346, but the bank’s 17,0000 investment bankers received an average bonus of £22,941.

Bankers’ bonuses have come under intense scrutiny since the start of the financial crisis, with increasing calls for a radical overhaul of banks’ pay structure and performance criteria.

At the height of the banking crisis RBS was given a £45bn bailout by the government to prevent it collapsing, and is now 82 per cent state-owned.

Although the chief executive of RBS, Stephen Hester, recently waived his own bonus of £930,000 for this year, he has defended the bonus payouts to staff.

In an interview for Sky News, he said: “We believe in pay for performance and that’s exactly what we practise.”

He said that the 2011 bonuses has been reduced by 43 per cent to reflect performance, while the investment banking division, where profits fell 50 per cent compared with 2010, has seen bonuses cut by 58 per cent.

Mr Hester commented that the bank’s overall performance in 2011 was strong and the bonus payouts were justified.

Prime Minister David Cameron has also spoken out in support of the bonuses being paid to RBS staff, saying he was ‘content’ with the payouts.

Despite the £2 billion loss, RBS’s core banking operations achieved a £6bn profit and bad debts were cut by 20% to £7.4 billion.

Earlier this week Lloyds Banking Group revealed that it is reclaiming around £2 billion in bonuses from ten executives, including four board members, because of their involvement in mis-selling Payment Protection Insurance.

Banks and financial institution routinely sold Payment Protection Insurance to consumers along with loans and credit cards, in order to cover payments if they became unable to pay them.

However many of the policies were invalid because the customer did not meet the qualifying criteria and in some cases the cost of PPI was added to monthly payment without the customer’s knowledge.

Lloyds Banking Group’s decision retrospectively to reduce the 2010 bonuses of senior executives involved in mis-selling loan insurance is a sign of the increased risks that bankers are starting to face personally. The move strikes me as appropriate: it is …

In a speech to bankers, the head of the Office of Fair Trading (OFT) said that banks must improve their services or face being broken-up.

The OFT’s chief executive, John Fingleton, said that despite investigations into the UK’s banking system by competition authorities, consumer bodies and the government, there is still too little competition.

He suggested that banks have been too slow in implementing recommendations on improving their services, such as making it easier for customers to move their accounts.

There has also been little progress on implementing a charging structure that is easier for customers to understand.

Mr Fingleton signalled that the OFT is ready to take tough action unless banks show they can do better for personal account customers.

If banks continue to fail this will be an indication that the fundamental structure of the UK banking sector is a fault and he will refer the matter to the Competition Commission.

In his speech to bankers at a seminar organised by Lloyds Banking Group, Mr Fingleton said:

“Going forward we need to see evidence which demonstrates that the market dynamics of entry and switching are sufficient to drive stronger customer-focused competition.

“Without this the obvious question is whether the concentrated market structure of UK banking is the problem.

“And one way to consider this question is a reference to the Competition Commission.”

The OFT will launch a review of the personal banking market and a referral could be made to the Competition Commission within months.

Meanwhile UK banks have suffered stock market falls after Moody’s credit ratings agency placed them under review.

Barclays, Royal Bank of Scotland and HSBC are all at risk of having their credit rating downgraded in the face of the ongoing economic downturn eurozone debt crisis.

Speaking to the BBC after the Royal Bank of Scotland’s chief executive announced his decision to forgo his bonus this year, the government has said that it will not block bonuses to the bank’s other executives.

RBS chief executive Stephen Hester was awarded £963,000 in shares but following pressure from public opinion and MPs he decided to follow the example of Lloyds Banking Group’s chief executive and waive his award.

Lloyds chief António Horta-Osório gave up a bonus which could have been worth £2.4m.

“We are not going to micro-manage bonuses,” a Downing Street spokeswoman said.

Bankers’ bonuses have been coming under increasing scrutiny since the 2007 banking crisis and with most banks expected to record a drop in revenues this year, the bonuses have been perceived as a reward for failure.

Banks’ investment banking operations suffered poor trading last year and multi- billion pound payouts for mis-sold payment protection insurance (PPI) have resulted in lower income which will reduce underlying profits.

Although Downing Street now plans to leave the question of bonuses to RBS’s management, Labour says it will continue to closely monitor the bonuses awarded to senior staff at RBS which is 66 per cent owned by the government.

At a European Parliament hearing in Brussels today, the European Union said it may impose tighter regulations on banks’ bonus payments to staff if they go against “all reason, common sense and morality.”

Michel Barnier, the European Union’s financial-services commissioner, may tighten up laws which govern banks across the EU if excessive bonuses continue to be paid.

One idea under consideration if for the role a bank’s shareholders play in setting pay awards to be strengthened.

Mr Barnier said the European Commission, the executive body of the European Union, will be “extremely vigilant” in monitoring bonuses paid by banks in 2012.