City watchdog the Financial Services Authority yesterday pledged to tackle sales incentive schemes at banks, building societies, insurers and investment firms, which it believes have fuelled mis-selling scandals.
The banking industry has so far provided almost £10bn to cover the cost of the mis-sold payment protection insurance (PPI), with Lloyds alone setting aside £4.2bn to compensate customers.
Flaws in incentive schemes at Lloyds, which is 40 per cent owned by the taxpayer, were so serious it is understood to have been referred to the FSA’s enforcement and financial crime division.
The FSA reviewed sales incentives at 22 firms between September 2010 and September 2011 and found most incentive schemes increased the risk of mis-selling.
One unnamed company had a “first past the post” system where the first 21 sales staff to reach a target could earn a “super bonus” of £10,000. It also found basic salaries for sales staff at one firm could move up or down by more than £10,000 per year, depending on how much they sold.
FSA managing director Martin Wheatley said: “This bonus-based approach has played a role in many scandals we have seen over the years. Incentive schemes on PPI were rotten to the core and made a bad problem worse.”
Lloyds, which owns mortgage giant Halifax, declined to confirm the investigation, but said it had made significant changes to incentive schemes.