Lloyds Bank PPI Scandal

I was intrigued by some of the information that came out of the hearing before MPs at the Parliamentary Commission on Banking Standards this week. Lloyds Bank Group has increased to over £5 billion the amount set aside to meet compensation claims for mis-selling.

It emerged that concerns had been raised through Lloyds’ audit committee about the way PPI (personal protection insurance) was being sold. The MPs heard that those concerns were exposed to the FSA by the then senior independent director during a visit with the former chief risk officer to the regulator in April 2006. Apparently during the visit the senior independent director “drew attention particularly to the concerns of the directors regarding the lack of standards for treating customers fairly.”

On the face of it this is an example of the non-executive directors and the audit committee trying to fulfill their role of upholding high standards of integrity and business conduct. Unfortunately the non-execs’ concerns didn’t seem to find their way through the executive management structure to prompt and effective decisions to resolve the problem.

Quote from the hearing: “net income from PPI made up nearly 14 per cent of the bank’s profits”.

Could this be another triumph for corporate avoidance decision-making?

See the Sun newspaper article here.

Channel 4 News video here.

The storyline in my novel Wounded Mountain touches on the role of non-executive directors in resolving (or is it failing to resolve?) corporate crises.