Lloyds chairman slammed for running 'cosy club which got out of control'

http://www.guardian.co.uk/business/2013/feb/04/lloyds-chairman-ppi-scandal-review

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The chairman of Lloyds Banking Group on Monday faced criticism for the way the bailed-out bank handled mis-sold payment protection insurance and attempted to avoid liability for claims that have already topped £5bn.

Giving evidence to the banking standards commission, Sir Win Bischoff faced repeated questioning about why the bank had participated in a judicial review that had stalled claims until last year.

"I would suggest to you it was a cosy club at the board level of Lloyds and you didn't have a handle on it and you allowed it to get out of control," said Labour peer Lord McFall. He added: "I'll put it to you it was because it was a hugely profitable product and you were damned if you were going to stop selling this product."

Bischoff strongly rejected the criticism, insisting Lloyds went for a judicial review for "clarity".

The bank, which has 5,000 staff devoted to dealing with PPI, was the first to withdraw from the review when the new chief executive, António Horta-Osório, arrived 18 months ago. The bank's total provisions have already reached £5.3bn – more than the first estimates for the entire industry.

A critic of "bogus" claims by professional claims management firms, Horta-Osório backed calls for a time limit for customers to make claims for PPI.

The latest mis-selling scandal covers interest-rate swaps and Horta-Osório said that the scandal had so far cost the bank £90m, which could rise on 1 March when the bank publishes its results for 2012.

Horta-Osório insisted that he had not given any thought to his bonus for 2012 – which could amount to £2.5m. "I don't want to speculate about something that, to the best of my knowledge, has not yet been discussed," he told the commission.

It is thought that his bonuses could be linked in future to the average price at which the taxpayer bought its 40% stake in the bank, at 74p per share, and could be withheld from him for five years. The shares closed last night at 50.6p.

Bischoff insisted that the bank, which unlike bailed-out rival Royal Bank of Scotland does not have a large investment banking arm, would be "very much aware" of public sentiment over pay.

"It will be the lowest undoubtedly of any bank," Bischoff said. The pair exposed differences with the industry lobby group the British Bankers' Association by refusing to support the BBA's criticism of banking reforms. The BBA had warned about the impact on lending of proposed reforms to banking regulation by George Osborne.

The Chancellor has threatened bank with break up if they do not implement the ringfence properly but the BBA's chief executive Anthony Browne had said it would "create uncertainty"

Horta-Osório insisted that he did not support the statement. The BBA said its members all had different opinions.

Lloyds is already 90% ring fenced, the bank said.