LONDON (Reuters) - The chief executive of Britain's biggest retail bank Lloyds has joined calls for a radical change within the industry, saying it must make a break with the culture of the past in order to restore the trust of customers.
UK banks have been hit by a series of scandals including interest rate rigging and the mis-selling of financial products, heightening disillusionment among Britons who already blame them for the 2008 financial crisis - which resulted in Lloyds and Royal Bank of Scotland being bailed-out by the taxpayer.
"Issue-by-issue and scandal-by-scandal the faith and trust in our industry has been eroded. Why? Because I believe that many banks lost sight of their core values and became complacent, non-customer-focused and inefficient," Chief Executive Antonio Horta-Osorio said in a speech at the CBI Scotland Annual Dinner in Glasgow on Thursday.
Horta-Osorio said the industry cannot continue lurching from crisis to crisis and a fundamentally different approach was required including changes to how banks serve their customers and pay employees at all levels. His comments come a day after Britain's Financial Services Authority (FSA) gave banks 18 months to stamp out incentives that encourage mis-selling or face action.
At a Thomson Reuters Newsmaker event on Wednesday, the FSA's managing director Martin Wheatley said it was time to tackle incentives for sales staff as banks were no longer serving customers properly. The FSA said it had started enforcement action against one firm which a source told Reuters was Lloyds.
Horta-Osorio, who joined Lloyds from Santander at the start of 2011, said in his speech that banks and their regulators should "forge a new relationship".
"It cannot be in anyone's interest to enter into the long legal disputes of the past. Now is the time to move on."
Horta-Osorio said Lloyds was committed to ensuring pay is increasingly linked to the long-term performance of the bank. For customer-facing staff, he said there would be less emphasis on hitting sales targets which have been blamed for encouraging mis-selling.
"In recent years the structure of variable pay in banking has focused too much on sales targets. This has had a detrimental impact on behaviour, in part contributing to the problems the industry has experienced with mis-selling."
Lloyds' top-earning executive was paid 2.8 million pounds ($4.5 million) for 2011 and Horta-Osorio could receive almost 10 million shares under this year's incentive plan.
Horta-Osorio added that the bank should be able to claw back pay from executives where decisions have damaged its performance or adversely affected customers. Lloyds took back nearly 1.5 million pounds in bonuses from its former chief executive and four other directors following an insurance mis-selling debacle.
Lloyds, which is 40 percent-owned by the government, has set aside 4.3 billion pounds for the mis-selling of payment protection insurance (PPI), far more than other banks.
Horta-Osorio said Lloyds was committed to reducing customer complaints faster than rivals. Complaints by UK bank customers have soared this year, due to customers claiming PPI compensation.
Horta-Osorio re-emphasised Lloyds' commitment to separate its retail and investment banking operations ahead of a 2019 deadline proposed by the government. He said Lloyds would be positioned as a "simple" retail and commercial bank.
Shares in Lloyds Bank closed up 6.7 percent to 36.2 pence on Thursday compared with a 4.4 percent rise in Europe's bank index. If Britain sold out of Lloyds now it would make a loss on its stake of about 8.5 billion pounds.
($1 = 0.6275 British pounds)
(Reporting by Matt Scuffham; Editing by Jon Loades-Carter)
Source: http://news.yahoo.com/lloyds-ceo-calls-radical-change-uk-banks-190212163--finance.html
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