Lloyds will claw back nearly 1.5 million pounds of bonus payments to its former chief executive and four other leading directors, following an insurance mis-selling debacle at the part state-owned British bank.
Lloyds, 40 percent owned by the government after a bailout, said on Monday it would reclaim some of bonuses it paid out on its 2010 results to take into account a 3.2 billion pound ($5.1 billion) provision it made last year over mis-sold payment protection insurance (PPI).
Lloyds' decision to take back the bonuses marks the first time that a British bank has exercised a clawback option on executive pay packages since the 2008 financial crisis. It also follows renewed scrutiny from politicians and the general public over bankers' bonuses.
Last month, Lloyds Chief Executive Antonio Horta-Osorio, who replaced Daniels in 2011, waived his bonus after taking time off work on sick leave. Philip Hampton and Stephen Hester, the chairman and chief executive of rival part-nationalised lender Royal Bank of Scotland, also decided against accepting their bonus payments following intervention from major political parties.
Lloyds said it would cut the bonuses due to be paid out in deferred shares by 40 percent for former chief executive Daniels, by 25 percent for four other directors, and by 5 percent for another eight senior bankers.
As in other countries it is still controversial in Britain that the banking profession which is held responsible for causing the financial crisis still awards large salaries and bonuses while elsewhere thousands lose their jobs in a weakening global economy.
Lloyds did not disclose the identities of the other bankers whose bonuses would be cut.
However, the other four executive directors on its board at the time of the insurance mis-selling were Helen Weir, who was the head of its retail banking arm, outgoing finance director Tim Tookey, former insurance head Archie Kane and Truett Tate, who is due to retire from the group this month.
Daniels had a basic salary of 1.04 million pounds for 2010. He had been due a performance-related bonus of 1.45 million, but this will now be cut by 40 percent, or 580,000 pounds.
Tate had been due a bonus of 1.05 million, while Tookey and Weir had been due bonuses of 942,000 and 875,000 pounds respectively. Kane had been due a 2010 bonus of 767,000 pounds, meaning Lloyds would cut nearly 1.5 million pounds in total off the bonuses of those top executives.
PPI insurance policies were typically taken out alongside a personal loan or mortgage to cover repayment if the borrower was unable to pay due to unemployment, sickness or accident.
But the policies were often mis-sold to the self-employed or unemployed people who would not have been able to claim.
They were also mis-sold to consumers who did not realise they were taking out such a policy. A court subsequently ruled that the banks were at fault.
Last May, Lloyds, Barclays, HSBC and RBS unveiled more than 5 billion pounds of charges to cover compensation for PPI mis-selling, with Lloyds penalised the most -- leading to its 3.2 billion pound provision.
(Additional reporting by Stephen Mangan; Editing by Myles Neligan and David Holmes)