Which? calls on banks to claw back PPI bonuses

Consumer research organisation Which? has called for millions of pounds in bonuses that were paid to executives in relation to sales of payment protection insurance to be clawed back.

In a letter to the remuneration committees of the UK’s five biggest lenders, the consumer group warned that unless the industry’s billion pound provision for mis-sold loan insurance was reflected in current remuneration arrangements, the banks would in breach of the City regulator’s pay code.

The five banks include Lloyds, which has made a PPI provision of £3.2bn; Barclays, which made a provision of £1bn; Royal Bank of Scotland, whose provision is £850m; Santander, which has set aside of £731m; and HSBC, which has allocated £270m.

Some banks - such as Barclays and RBS - claimed they stopped selling the majority of PPI by the time the clawback rules were introduced in 2009, potentially making it difficult for them to retrieve previous awards to executives involved in the scandal.

Lloyds, which announced it would stop selling the insurance product altogether in July 2010, has been looking to claw back part of the bonuses given to Eric Daniels, former chief executive, and some of his top staff, according to reports.

The demand from Which? follows a similar call by the Financial Services Authority, which has urged banks to strip bonuses paid to those who were in charge when the controversial loan insurance was sold.

Public anger over bank remuneration has already led Stephen Hester, chief executive of RBS, to give up his £1m bonus this year.

Earlier in the year, Antonio Horta-Osorio, chief executive at Lloyds Banking Group, declined to take an annual bonus for 2011, saying his recent absence and “the tough financial circumstances” facing many Britons made the payment inappropriate.

Under the regulator’s rules, deferred awards can be cut if the business suffers a material failure of risk management or downturn in performance.