MPs have attacked Lloyds Banking Group’s chairman and chief executive over the bank’s behaviour as the payment protection insurance (PPI) mis-selling scandal unfolded.
The bank was accused of failing to acknowledge the scale of the problem early enough and of pressuring the Financial Services Authority (FSA) into dropping enforcement action against it following a two year investigation, an allegation it denied.
Appearing in front of MPs Lloyds chief executive António Horta-Osório (pictured) and chairman Winfried Bischoff were also forced to defend the bank’s decision to await the outcome of the British Bankers Association’s challenge to an FSA ruling on PPI mis-selling rather initiate client contact and redress.
During a tense exchange with Bischoff, Labour peer John Mcfall accused the bank of avoiding regulatory enforcement action in 2008 due its size and legal resources, something smaller banks, which were fined at the time, lacked.
‘Lloyds bullied to make sure enforcement did not take place,’ he said.
Bischoff denied the accusation saying the bank did not bully the regulator ‘in any way’.
McFall went on to accuse Bischoff of sitting on a 'cosy board while the world was passing the board by’ and of not proactively putting a halt to PPI sales as it was too profitable a product for the bank.
‘It was a profitable product and you were damned if you were going to stop selling this product,’ he said.
Bischoff denied this pointing out Lloyds stopped selling PPI in 2010.
The pair were also grilled over Lloyds' sale of interest rate swaps to small and medium sized businesses (SMEs).
Last week an FSA review revealed that the big four banks had mis-sold over 90% of the complex interest rate swaps bought by unsophisticated businesses.
However, Horta-Osório revealed that Lloyds had set aside £90 million to pay redress to SMEs, the lowest amount of any of the big four banks caught up in the scandal.
He said the bank had set aside less money than its rivals due to its low level of cross selling investment banking products to its SME customers.