Bonus clawbacks loom after Lloyds Bank Group fined

FCA director Tracey McDermott said Colluding to benefit the firms at the expense of the UK taxpayer was unacceptable. Picture: Getty

The Financial Conduct Authority (FCA) fined Lloyds and Bank of Scotland £70m for attempts to manipulate the fees payable to the Bank of England for participating in a taxpayer-backed government special liquidity scheme (SLS) in the financial crash.

Lloyds’s chief executive Antonio Horta-Osorio, who joined in 2011 after the events, branded the behaviour “absolutely unacceptable”. The bank added: “The group’s board will now consider all the remuneration implications and potential actions available to it.”

Lloyds yesterday published a letter from Mark Carney, governor of the Bank of England (BoE), to the bank’s chairman, Lord Blackwell, dated 15 July, saying: “Such manipulation is highly reprehensible, clearly unlawful and may amount to criminal conduct on the part of the individuals involved.”

The FCA said Lloyds had paid £7.76m to the BoE in compensation for the actions of the four individuals – a manager and trader at each firm – involved in rigging submissions to the relevant “Repo” rate that was linked to payments for the special liquidity scheme. The payment covers the losses the central bank suffered on fees from other banks using the SLS as well.

Separately, Lloyds is paying £35m to the FCA, £62m to the US Commodity Futures Trading Commission and £51m to the US Department of Justice for manipulation of Libor – the rate at which banks lend to each other that also affects the cost of mortgages and business lending.

The FCA said 16 individuals, seven of them managers, were involved in or aware of the Libor scam, which is part of an industry-wide regulatory probe that has seen several banks fined.

Lloyds said yesterday that the actions “were not known about or condoned by the senior management of the group at that time”.

However, it is understood the bank has ruled nothing out in terms of potential bonus clawbacks, including consideration of the individuals involved, and potentially up to boardroom level.

Directors at the time of the Libor manipulation between May 2006 and June 2009, and the Repo rigging between April 2008 and September 2009, included chairman Sir Victor Blank and chief executive Eric Daniels.

Lloyds said all the individuals directly involved had either left the group, been suspended or are subject to disciplinary proceedings.

Blackwell said in his letter replying to the governor that it was “truly shocking conduct, undertaken when the bank was on a lifeline of public support”.

Tracey McDermott, the FCA’s director of enforcement, said: “The firms were a significant beneficiary of financial assistance from the Bank of England through the SLS. Colluding to benefit the firms at the expense, ultimately, of the UK taxpayer was unacceptable.”

During the period that Lloyds TSB and HBOS used the special liquidity scheme, they paid £1.28 billion in fees.

The £105m total fine from the FCA is the joint third highest ever imposed by the group or its predecessor, the Financial Services Authority.