Lloyds Bank Hit With £900m Insurance Fine
Lloyds bank has been hit with yet another massive fine thanks to their dodgy insurance-selling practices over the past few years. They have been ordered to pay a £900 million fine in order to compensate their customers who have been miss-sold insurance for their loans. This could be an almost crippling blow for the bank because they have only just narrowly passed a recent European stress test to check the health of the different banks in the EU.
This latest fine took Lloyds’ total compensation bill for mis-selling insurance (PPI, or payment protection insurance) to £11.3 billion, which is miles more than any other bank and almost half of the entire bill for the banking industry. These insurance policies were designed to protect customers by covering their repayments if they lost their jobs or became ill. However, these insurance policies were regularly sold to people who didn’t need them or would never be eligible to make a claim.
Expert analysts have reported on the situation, saying that they expect Lloyds bank to have to set aside another £1 billion in order to pay all of the insurance compensation that they owe to their customers. Lloyds’ financial director George Culmer said: “We cannot rule out further increases.”
The most recent insurance fine arrived just days after Lloyds scraped by, passing the ‘stress-test’ set by regulators to calculate whether a bank will have enough capital to survive another economic crash or not. Lloyds bank was the worst performing British bank in the entire rest. They will face a second test set by the Bank of England in December which will measure the firm’s strength in different hypothetical scenarios, such as a decline in house prices and a rise in interest rates.
Mr Culmer said: “I am confident that Lloyds will pass the Bank of England’s stress test in November and we will be cleared to pay a ‘modest’ dividend for 2014. The discussions look at earnings, they look at capital and they look as stress tests. We consider ourselves to be in a good position with regards to those 3 criteria as we go into those discussions.” As a result of this news, Lloyds shares were down 1.8 percent earlier this morning.
James Savery, 28 October 2014