Which? is calling for bank executives who received bonuses for mis-selling payment protection insurance to be forced to pay them back, urging consumers to reclaim PPI.
Which? has written a letter to the remuneration committees of banks involved in the scandal, stating that they would be breaching the City regulator’s pay code unless they go one step further and force related bonus arrangements to be cancelled.
Banks owe billions in PPI compensation
The Financial Services Authority (FSA) has also called on banks to ‘claw back’ bonuses from those responsible for mis-selling PPI in the first place, even if they have since left the bank.
Lloyds, Barclays, Royal Bank of Scotland (RBS), Santander and HSBC have been forced to set aside over £6 billion between them to pay compensation to consumers who were mis-sold PPI. Barclays and RBS, which have made PPI provisions of £1.16 billion and £1.05 billion respectively, claim they had largely stopped selling PPI by 2009, when the FSA’s remuneration code was introduced.
That was the first time that a clawback provision was introduced into bank executives’ contracts. Given that PPI was, for a long time, a very profitable business, these bonuses are likely to be huge.
Government banking rhetoric tested
The FSA rules state that deferred awards can be cut if the business suffers a material failure of risk management or downturn in performance.
Richard Lloyd, executive director at Which? said: ‘This is one of the clearest examples of unfair treatment of customers and reward for failure on an industrial scale.
‘There has been a lot of rhetoric from the government and banks about linking performance to pay. This will be the test to see what that rhetoric means in practice.’