Banks may not be able to claw back mis-sold PPI bonuses

Legal provisions on pay awards may not work for PPI mis-selling

by Luke Whitmore, 23rd May 2011

The banks may not be able to use clawback provisions to reclaim bonuses from bank executives who made a name for themselves mis-selling PPI, industry sources have suggested.

PPI, or Payment Protection Insurance, was widely sold alongside loans to customers who had no use for it or even could not use it, with some people reporting that they were not even told that they would be paying for it. The banks backed down on the topic two weeks ago, deciding not to appeal against the outcome of a court case which went against them and admitting that they had been in the wrong.

The banks now face customer compensation payouts which run into the billions. At a general annual meeting last week, Lloyds chairman Win Bischoff stated that Lloyds intended to look into the legality of clawing back part of this sum from bonuses paid to bankers who mis-sold PPI, claiming that "The implications on compensation are being considered by the remuneration committee and will be determined by the board in due course, in line with the FSA code on compensation."

This was followed by similar comments from higher-ups at Barclays and RBS, who also expressed an interest in seeing whether such a course of action may be legal.

But sources have claimed that, while it is possible to withdraw deferred pay awards which turn out to have been based on false profits, there is no provision for doing so if the bonus has already been given out. Additionally, it would only be possible to use clawback provisions in these cases if it was possible to demonstrate that the bonus was directly linked to the mis-selling of PPI.

With billions of pounds in compensation to pay out to wronged consumers, it seems that the limited portion that could be reclaimed from bankers' bonuses will be cold comfort for banks.

If you have been mis-sold PPI, we can help you with PPI reclaiming today.

Claims Financial