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UK FCA fines Lloyds £28m for sales incentive scheme

The UK Financial Conduct Authority (FCA) has imposed a monetary penalty of £28m on Lloyds TSB Bank and Bank of Scotland, for selling any financial products to customers, without assessing their needs.

The market watchdog accused both banks, which are part of Lloyds Banking Group (LBG), for their retail conduct failings and said that they developed a culture of mis-selling of products.

The incentive schemes, which were executed during 2010 and 2012, led to a serious risk that sales staff were put under pressure to hit targets to get a bonus or avoid being demoted, instead of concentrating on the requirements of consumers.

"In one instance an adviser sold protection products to himself, his wife and a colleague to prevent himself from being demoted," the FCA said in a statement.

FCA enforcement and financial crime director Tracey McDermott said, "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.

"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," McDermott added.

Both banks have consented to conduct an analysis of higher risk advisers’ sales and pay redress where unsuitable sales took place.

The FCA said that the Lloyds TSB had also been fined for the unsuitable sale of bonds in 2003, and due to repeated nature of offence, the fine has been increased to 10%. Although Lloyds settled the case at an early stage, it qualified for a 20% discount, otherwise the fine would have been £35m.