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LLoyds Banking Group considers dropping annual bonuses

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Lloyds Banking Group is considering abandoning annual bonuses for senior staff, according to reports today.

The 40% taxpayer-owned bank is examining whether to extend the timeframe of longer-term incentives to up to 10 years, said the Financial Times, which has spoken to people asked about the plan.

The plan would align bankers’ pay with the long-term interests of shareholders. The FT said the idea is being put to investors as Lloyds seeks to prove to politicians and taxpayers that it is taking a more responsible attitude to the topic.

The news comes after the chairmen of five of the high street's biggest banks, including Lloyds Banking Group chairman Sir Win Bischoff (pictured), told delegates at the British Bankers’ Association annual conference there was a need to reassess pay and how profits were shared between management, employees and shareholders.

Speaking at that event last week Sir David Walker, chairman designate of Barclays, said the appropriateness of incentives must be analysed and structures where revenues were related to performance were fundamentally flawed and corrupt.

It is the responsibility of all remuneration committees to monitor developments and consider how bonus and incentive schemes should evolve. Lloyds Banking Group would only say: “We keep our remuneration plans under review at all times but have no current plans to change our structures and do not expect to do so in the foreseeable future.”

Speaking at the British Bankers’ Association conference KPMG UK head of financial services, Bill Michael, called for a new Banker’s Code that was relevant to today.

This would “create a common language to discuss what our banking culture is seeking to achieve”, “articulate clear measures, making it easier for our peers and public to hold us to account” and “frame the behaviours that should be rewarded through incentive structures” Michael said.

“Prudent companies rarely go bust. When faced with greater risk, they exhibit greater caution. They don’t put blind faith in complex models. They don’t reward themselves for huge bets on the market. When faced with ‘good times’ they build reserves for a rainy day,” he added.