Lloyds Banking Group, the owns of Lloyds TSB and Halifax Bank of Scotland has stripped its directors of £2 million of bonuses due to the banks losses on payment protection insurance or PPI. The losses have been incurred after Lloyds posted a £3.2 billion provision in their accounts for the costs of mis-selling payment protection insurance. In the case of Lloyds boss Eric Daniels, the bonus loss is worth £580,000.
Payment protection insurance was a big money spinner for the arrangers of loans and mortgages. However, many of the policies were shown to be useless as they were sold to people with non-qualifying occupations such as the self-employed. The problem for the banks was that they had incentivised their sales staff with commission rates. The larger the loan, the higher the commission. This made mortgage payment protection insurance (MPPI) particularly attractive.
