Lloyd's bank
FCA Slams Lloyds with Largest Ever Fine for Serious Sales Incentive Failings (Photo: Reuters)

The Financial Conduct Authority has imposed the largest ever fine for retail conduct failings on Lloyds Banking Group after determining that its sales incentive schemes could pressure staff into mis-selling products to customers.

According to a FCA statement, Lloyds has incurred a £28m (€33m, $46m) fine for failings at various businesses that it owns, including Lloyds TSB, Bank of Scotland and Halifax, which is part of Bank of Scotland.

The regulator said the incentive schemes put sales staff under pressure to hit targets, to get a bonus or avoid being demoted, rather than focus on what consumers may need or want.

In one instance an adviser sold protection products to himself, his wife and a colleague to prevent himself from being demoted.

"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," said Tracey McDermott, the FCA's director of enforcement and financial crime.

"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.

"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."

The FCA added that 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, it increased the fine by 10%.

The FCA's investigation focused on advised sales of investment products, such as share Individual Savings Accounts (ISAs), and protection products, such as critical illness or income protection, between 1 January 2010 and 31 March 2012.

During this period, the FCA said Lloyds TSB advisers sold more than 630,000 products to over 399,000 customers, who invested about £1.2bn and paid £71m in protection premiums.

Halifax advisers sold over 380,000 products to more than 239,000 customers, who invested around £888m and paid £38m in protection premiums.

While Bank of Scotland advisers sold over 84,000 products to over 54,000 customers, who invested around £170m and paid £9m in protection premiums.