Still paying the price

In the wake of announcing 9,000 job losses over the next three years, the part taxpayer-owned Lloyds Banking Group is forcing employees, customers and shareholders to pay for its shameless incompetence.

Collective mea culpa?

The bank faces today (October 28) an additional £900m pound charge—on top of the more than £10bn it had been previously slammed with – for cheating its customers by needlessly selling payment protection insurance policies.

These PPI policies, which are designed to cover repayments in case customers become ill or lose their job, were sold to millions, most of the time without their knowledge. Many customers who did purchase the policies were ineligible to make claims anyway.

Now totalling over £11.3bn, Lloyd’s PPI penalty charge is the largest in the industry. Analysts predict the bank to set aside £1bn more for its PPI compensation scheme in the next year.

Unite national officer for finance Rob MacGregor explained that what’s most outrageous about the PPI scandal is the fact that it began in 2012, several years after the economic crash.

“We were supposed to have this collective mea culpa from all the banks after the economic crash – that ‘things were going to change’ – but in fact inappropriate activity is still going on,” said MacGregor.

“It’s at the root of all that’s wrong with the entire industry,” he added.

MacGregor contends that the shameless mis-selling of financial products like PPI will continue unabated if retail banks attempt to deliver the same returns to shareholders as investment banks used to.

“If you do try to deliver that level of shareholder return in retail banking,” MacGregor explains, “that’s when you end up with the nightmare of PPI scandals, of inappropriate selling, and of a performance-driven sales culture that is broken.”

Near stress test fail

The latest chapter in the bank’s PPI scandal comes two days after it was revealed on Sunday (October 26) that the bank barely passed a European Banking Authority stress test, which measures its ability to weather a future economic crash.

Lloyds performed the worst out of all UK banks which underwent the stress test, and analysts predict that the bank will not be able to resume paying shareholder dividends, with experts at one stockbroker saying they did not expect “material dividends” until 2016.

Lloyds has not paid shareholder dividends since before the economic crash in 2008, when it was rescued by a massive taxpayer-funded government bailout to the tune of ÂŁ20.5bn.

The bank can expect a tougher stress test in the UK due in December, as the Bank of England test is based on a larger fall in house prices. Experts have expressed concern about how the bank will fare in the BoE test, the failure of which will further compromise its ability to pay shareholders.

“These tests are to ensure that we don’t have to have massive state interventions in the event of a crisis,” explained MacGregor.

“But despite all that’s been said about having a much smaller, discrete banking sector that couldn’t have that kind of cataclysmic impact on the UK economy, these banks are still enormous,” he added. “Their balance sheets are huge, and if they were to fail, the repercussions for the British economy would arguably be worse than in 2008.”

MacGregor noted that Lloyd’s weakest position among UK banks in the stress test plays into the bank’s “narrative that makes the case for slashing pay and conditions,” which he says have plummeted in recent years.

But Lloyds executive pay and compensation for top earners continues to rise to astronomic levels – the chief executive Antonio Horta-Osorio took home £4.5m last year, including a £1.7m bonus, while 27 of the highest paid earners at Lloyds earned almost £1m a piece.

As Lloyds adds another potential 9,000 job losses to its 43,000 redundancies since 2008—all the while deceiving its customers with fraudster financial products—many of today’s newspapers, from the Guardian to the Times and the Financial Times, were splashed with full-page Lloyds ads in the papers’ front sections.

The cost of these ads? Many run up to ÂŁ30,000 or more each.

The bank’s message, as it slashes its workforce and destroys communities? “Helping Britain prosper.”