Lloyds Fined £28m For Sales Incentive Scheme

Lloyds Banking Group has been fined £28m for "serious failings" which rewarded sales staff with 'grand in your hand' bonuses, even when products they sold consumers were deemed unsuitable.

The Financial Conduct Authority (FCA) said the penalty was the biggest it had imposed against a retail banking operation, which took in behaviour at Lloyds TSB, Bank of Scotland (BoS) and Halifax between 2010 and March 2012 - a period when it became clear that Lloyds was particularly exposed to the separate payment protection insurance mis-selling scandal.

The regulator said the bonus schemes at the heart of its inquiry put pressure on sales staff to hit targets relating to investment products such as stocks and share Isas and insurance protection products.

In one instance, an adviser was found to have sold insurance products to himself, his wife and a colleague to prevent himself being demoted.

The FCA said the bonus schemes had worrying "higher risk" features, which offered the potential of an automatic promotion and pay rise or salary cuts of up to 50% if targets were not met.

Lloyds Banking Group is run by Antonio Horta-Osorio

Lloyds TSB also offered a so-called "champagne bonus" that could see an adviser land a windfall worth 35% of their monthly salary, while Halifax and BoS paid one-off monthly prizes, such as a "grand in your hand."

The investigation found that 70% of advisers at Lloyds TSB and 30% at Halifax still received their monthly bonus, even though a high proportion of their sales were found - by the firms themselves - to be unsuitable or potentially unsuitable.

A further 229 advisers at Lloyds TSB received a bonus even when all of their assessed sales were deemed unsuitable or potentially unsuitable; and 30 advisers received a bonus in the same circumstances on more the one occasion.

Tracey McDermott, the FCA's director of enforcement and financial crime, said the fine was increased as Lloyds ignored repeated industry warnings from regulators over incentive schemes.

She added: "The findings do not make pleasant reading.

"Financial incentive schemes are an important indicator of what management values and a key influence on the culture of the organisation, so they must be designed with the customer at the heart.

"The review of incentive schemes that we published last year makes it quite clear that this is something to which we expect all firms to adhere. 

"Customers have a right to expect better from our leading financial institutions and we expect firms to put customers first - but firms will never be able to do this if they incentivise their staff to do the opposite.

"Both Lloyds TSB and Bank of Scotland have made substantial changes, and the reviews of sales and the redress now being made should right many of these wrongs," she concluded.

Lloyds Banking Group - which has since split the TSB operation into a separate brand - responded to the penalty by apologising.

Its statement said: "The Group has already commenced a review to address potential customer impacts that may have occurred as a result of these failings.

"We are already contacting customers, and will continue to contact potentially affected customers over the coming months. Customers do not need to take any action at this stage to be included in the review and they will be contacted in due course.

"The Group recognises that its oversight of these particular schemes during the period in question was inadequate and apologises to its customers for the impact that they may have had.

"We are determined to ensure that any customer impacts are dealt with quickly and fully."

It concluded: "The cost of the enforcement and the review is not expected to have a material impact on the Group."

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RBS Finance Chief Bostock Quits After Ten Weeks

By Mark Kleinman, City Editor

The new chief executive of Royal Bank of Scotland (RBS) suffered a huge blow on Tuesday when his finance chief quit less than 10 weeks after he joined its board.

Sky News can exclusively reveal that Nathan Bostock, who was appointed as RBS' finance director on October 1, has resigned to join the Spanish bank Santander UK as its chief risk officer and deputy chief executive.

The timing of Mr Bostock's prospective exit from RBS is unclear, while his move to Santander is understood to be subject to regulatory approval.

Both banks were attempting to keep Mr Bostock's defection under wraps on Tuesday, until Sky News's disclosure of his move forced RBS into an after-hours announcement.

"The Royal Bank of Scotland Group can confirm that Nathan Bostock has this evening informed the Board of his intention to resign from his role as Group Finance Director," it said in a statement.

"His formal resignation is expected soon, but he will remain in his position to oversee an orderly handover of his responsibilities. Details on arrangements for his successor will be announced in due course."

Mr Bostock's exit will cause a significant headache for Ross McEwan, the taxpayer-backed bank's chief executive, who is conducting a comprehensive review of the bank's operations.

Mr McEwan is wrestling with a succession of IT problems which last month caused hundreds of thousands of the bank's customers to be left stranded after a computer systems failure.

He has pledged to overhaul RBS''approach to customers, strengthened by a new management team, of which Mr Bostock was supposed to become an integral part.

"(The) systems failure was unacceptable," Mr McEwan said in a statement. "(It) was a busy shopping day and far too many of our customers were let down, unable to make purchases and withdraw cash.

"For decades, RBS failed to invest properly in its systems. We need to put our customers' needs at the centre of all we do. It will take time, but we are investing heavily in building IT systems our customers can rely on."

Given his background as RBS' restructuring chief, Mr Bostock was expected to play a particularly prominent role in the creation of a £38bn internal 'bad bank' announced last month.

His defection represents the second time in as many years that Mr Bostock has left the board of one of Britain's major banks in the lurch after agreeing to take a senior new role.

In 2011, he was due to leave his position as the head of restructuring and risk at RBS to run the wholesale operations of Lloyds Banking Group, but changed his mind after Antonio Horta-Osorio, the Lloyds chief executive, took a period of sick leave.

Mr Bostock, a former Abbey National executive, was then promoted to the finance director's post at RBS after the bank announced that the incumbent, Bruce Van Saun, was leaving the UK to run Citizens, its US retail bank.

As part of a review of RBS' operations ordered by George Osborne, the Chancellor, RBS has agreed to accelerate the sale of Citizens.

It is unclear whether the Prudential Regulation Authority will look dimly on Mr Bostock's move, given the juxtaposition of the significant size of RBS' balance sheet and relative inexperience of its senior team.

Mr McEwan only joined RBS last year after a career spent in retail banking, while Mr Hester's recent departure as well as that of John Hourican, the investment bank chief, has left RBS' executive ranks thin on top-level banking experience.

A person close to the situation said that Mr McEwan's review of RBS' operations was likely to entail significant change at the bank, and that the recruitment of an outsider as his finance director looked logical in that context.

Mr Bostock's appointment as deputy chief executive of Santander UK is understood to have been accompanied by an assurance that he will be in line to replace Ana Botin as the bank's chief executive when she steps down.

Santander is expected to float its UK arm in the next couple of years.

Santander declined to comment.

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GM Puts Brakes On Australia Car Production

Australia's auto industry has taken another step towards extinction following confirmation General Motors (GM) is to shut its Holden manufacturing plants by 2017 with the loss of 2,900 jobs.

The Holden brand - which is GM's Australian equivalent of Vauxhall in the UK - currently operates two plants in Adelaide and in Melbourne.

The move leaves Toyota as the only major car manufacturer in Australia but the Japanese firm confirmed after GM's announcement that it was now reviewing its own future in the country.

Holden's decision to move to a national sales company comes after Ford said in May it would stop making vehicles at its unprofitable Australian factories in 2016, with the loss of 1,200 jobs.

With Mitsubishi closing its Adelaide plant five years ago, only Toyota Australia - which employs more than 4,000 workers - will be left making cars in the country.

"The decision to end manufacturing in Australia reflects the perfect storm of negative influences the automotive industry faces in the country," GM chief executive Dan Akerson said in a statement.

"This includes the sustained strength of the Australian dollar, high cost of production, small domestic market and arguably the most competitive and fragmented auto market in the world."

He made the announcement following confirmation he was to be replaced by life-long GM employee, Mary Barra, who was to become the company's first female CEO.

Holden, maker of the iconic Commodore car, said 2,900 jobs would be axed over the next four years - 1,600 from its Elizabeth vehicle manufacturing plant in Adelaide and approximately 1,300 from the workforce in Melbourne.

It spells the end of a long association with Australia. Holden began as a saddlery in 1856 before manufacturing cars in 1948.

Unions have warned of a multi-billion-dollar hole in the economy and the loss of up to 50,000 automotive industry-related jobs if car manufacturing in Australia ends altogether.

Toyota said of GM's decision: "This will place unprecedented pressure on the local supplier network and our ability to build cars in Australia."

"We will now work with our suppliers, key stakeholders and the government to determine our next steps and whether we can continue operating as the sole vehicle manufacturer in Australia."

The Australian Manufacturing Workers Union said it expected Toyota to follow Holden's lead.

"It's now highly likely that Toyota will leave Australia. In fact it's almost certain," AMWU national vehicles division secretary Dave Smith told reporters.

"It's a very bleak day indeed."

Treasurer Joe Hockey said the government would work closely with the state governments and unions to ensure Holden's departure "does not lead to a significant economic downturn in South Australia or Victoria".

"We will do everything to help in this transition," he told parliament.

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US Budget Deal Should Avoid New Shutdown

Congressional negotiators have staged a rare show of bipartisanship to reach a modest US budget agreement, which should eliminate the threat of another partial government shutdown early next year.

The plan - expected to be approved by both houses of Congress - restores about $63bn (£38bn) in automatic spending cuts from programmes ranging from parks to the Defense Department.

Spending increases would be offset by a variety of increased fees and other provisions elsewhere in the budget totalling about $85bn (£52bn) over a decade, leaving enough for a largely symbolic cut of about $23bn in the nation's debt, now standing at $17trn and growing.

The White House quickly issued a statement from President Barack Obama praising the deal as a "good first step".

He urged lawmakers in both parties to follow up and "actually pass a budget based on this agreement so I can sign it into law and our economy can continue growing and creating jobs without more Washington headwinds".

National Parks were closed during October's shutdown

While bipartisan approval is expected in Congress, there remains grumbling from liberals over the omission of an extension of long-term unemployment benefits while Tea Party-aligned groups are pushing Republicans to oppose it.

But there is confidence there is enough support behind the agreement to prevent a repeat of the partial shutdown, which marred the start of the US federal budget year on October 1.

That fight centred on Republican attempts to block funding for the President's overhaul to the health care system.

The country also came close to the first-ever federal default when Congress could not reach agreement on raising the debt ceiling.

Republicans eventually relented and agreed to a short-term deal to fund the federal government and raise the debt ceiling when it became clear that Americans were deeply angered over their tactics.

Announcement of the new deal came from the two negotiators, Democrat Senator Patty Murray and Republican Paul Ryan.

Ms Murray said: "We have broken through the partisanship and gridlock" that could have produced a government shutdown in January.

While Tuesday's agreement would have little impact on deficits, it holds the potential for avoiding politically charged budget clashes for the next year or two.

Many Americans were angry about the shutdown

But the plan does nothing to address three of the big drivers of American deficit spending - the Medicare government health insurance programme for the elderly, the Medicaid aid programme for the poor and the Social Security government pension system.

Conservatives are upset that the plan rolls back automatic spending cuts, known as the sequester, while liberals are angered about the requirement that federal employees will have to pay more toward their pension accounts.

Significantly for Democrats, they failed in their bid to include an extension of benefits for workers unemployed longer than 26 weeks.

The programme expires on December 28, when payments will be cut off for an estimated 1.3 million individuals.

Officials said that under the agreement, an estimated $63bn in automatic spending cuts would be restored through the end of the next budget year, which runs to September 30, 2015.

The offsetting $85bn in deficit cuts would play out over a decade.

It calls for newly-hired federal workers to make larger contributions to their own pensions, as well as an increase in a federal airport security fee that would add $5 to the cost of a typical round-trip flight.

The annual increase in military retirement benefits for those under age 62 would be slowed.

More savings would come from extending an existing 2% cut in payments to providers who treat Medicare patients.

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Tesco Blames Customers For Fruit And Veg Waste

By Anushka Asthana, Political Correspondent

Tesco has accused its customers of contributing to food waste by shunning perfectly edible fruit and vegetables because they are "ugly or misshapen".

A director at the supermarket said it wanted to "educate" shoppers to realise that wonky carrots or marked apples can be "perfectly good food".

Matt Simister, the group food sourcing director at Tesco, said British consumers "always pick the cream of the crop".

"We do have a role to educate people … Our role is to [help people] make the right choices."

The supermarket is considering putting more imperfect fruit and veg on offer, he told the House of Lords EU sub-committee on agriculture.

Tesco's says customers will only pick the best - the rest go to waste

"Customers naturally select, they always pick the cream of crop first and the rest of it then gets left.

"Then the new deliveries come in and you have the new cream of the crop - the old, ugly misshapen goes to waste. Customers will always make the choice of the one that cosmetically looks better. That's a very difficult reality to us."

He added: "We can put more misshapen products through our value range at better prices, we've been doing that for years. There are opportunities to do more."

EU rules on misshapen fruit and veg were relaxed in 2009 but British supermarkets still have private standards that are higher.

Mr Simister said that was because of what "customers tell us they want in perishable produce".

As a result supermarkets often reject misshapen products that are then sent to eastern Europe. There, people facing a financial squeeze will accept less "cosmetically" pleasing options for a lower price, he said.

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Tesco Bank To Offer Current Accounts

Tesco Bank is to start offering current accounts in 2014 as it moves to profit from the misfortunes of its biggest rivals.

The bank, which was founded in 1997, is to create 600 new jobs in Glasgow and Edinburgh over the next few years as it expands its operations from credit cards, personal loans, savings, mortgages and general insurance.

Tesco said the positions were permanent with the majority being full time and instead of incentivising sales, it would offer a competitive basic salary and pension scheme.

Benny Higgins, Chief Executive of Tesco Bank, said: "Since 2008, we have invested to build a bank for Tesco customers.

"We now have more than 6.8 million accounts and offer straightforward, transparent products which reward loyalty and provide great value.

"We are making excellent progress towards the launch of our current account next year and the recruitment of these new roles is an important milestone in that process."

Tesco Bank's decision comes at a tough time for its major rivals while other challenger banks continue to struggle to make an impact against the dominance of RBS, Lloyds, HSBC and Barclays.

The big banks remain under pressure over a host of scandals, including the mis-selling of payment protection insurance (PPI). Rate-rigging and other such practices have further damaged the industry's reputation in the wake of the financial crisis.

On Wednesday it was also confirmed that Lloyds Banking Group had been fined £28m for sales incentive schemes which were found to reward staff even though the products they had sold were deemed unsuitable for the customer.

Tesco Bank currently employs 4,000 staff with its operations largely concentrated online and via the phone.

The development was welcomed by the Chancellor George Osborne who tweeted: "Good to see @Tesco entering current account market. More choice is best way to deliver a banking sector that works for customers."

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Twitter: Photos Now In Direct Messages

Twitter users can now send pictures privately to their followers using the direct message (DM) function.

Images previously sent by DM had to be viewed via the external twitpic site, but now users can see them from within the message.

The move is seen as an attempt to broaden the way the service is used and compete with the popularity of messaging services such as WhatsApp and Snapchat.

A new tab in the navigation bar has been introduced to make DMs easier to access.

Writing in a blog post, the company also unveiled other tweaks for their Android and iPhone apps.

For example, the ability to swipe between different sections - such as Home, Activity and Discover, and improved mobile notifications.

Twitter has more than 230 million users and the recently-floated company has a stock market value of nearly $28bn (£17bn).

But despite its popularity, the company has not yet been able to make big money from its user base and is not expected to make a profit until 2016, according to Bloomberg.

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Spending Squeeze: Household Priorities Shift

By Poppy Trowbridge, Consumer Affairs Correspondent

Household spending on housing (excluding mortgages), fuel and power has surpassed transport for the first time in recent years, figures from the Office for National Statistics (ONS) show.

We are cutting back most on transport, only spending £64.10 a week in 2012, compared with £67.20 the previous year.

Giles Horsfield, Editor of the Family Spending report, said: "What we can see are some very complex trends on what people chose to spend their money on, and what people feel they have to spend their money on.

"Households have found ways of using less fuel, selecting more fuel efficient cars and cutting out non-essential journeys.

"On some types of discretionary spending, households are spending less but other things buck the trend – like clothing and footwear."

On average we spend £68 a week, including £10.80 on electricity and £10.40 on gas, the ONS revealed in its annual report on the cost of living and food expenditure.

In total, households only spent about a pound more on electricity, gas and other fuels to power homes in 2012 than in 2011, despite growing concern that the 'Big Six' energy companies are hiking prices at inflation-busting rates.

However, the proportion of households renting has risen in recent years, from 29% about a decade ago, to 34% in 2012.

The rise in renting defies the general trend as most types of spending stayed relatively stable or decreased slightly over the period, according to the figures.

The total average household spend was £489 a week in 2012, compared with the pre-recession average spend of £529 a week in 2006.

We are also spending significantly more on clothing and footwear, now about £23.40 a week, compared with £21.90 a year earlier.

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M&S Chairman To Aid Ministers' £20bn Sell-Off

By Mark Kleinman, City Editor

The chairman of Marks & Spencer (M&S) is being tapped up by ministers to assist with plans to raise £20bn from state-owned asset sales by the end of the decade.

Sky News has learnt that Robert Swannell, a City veteran, is to be named as a director of the Shareholder Executive (ShEx), the body which oversees Government-owned companies such as the Royal Mint and Urenco, the uranium processor.

Mr Swannell's appointment as a non-executive director of ShEx is expected to be announced within days.

The body, which is part of Vince Cable's Department for Business, Innovation and Skills (BIS), is also poised to appoint a former investment banker from JP Morgan, the firm which told the Government that Royal Mail could be worth nearly £10bn before its privatisation, to its board.

Robin Lawther, who worked in the Wall Street giant's Nordic operations and then its asset management business until this year, will also become a non-executive director of ShEx, insiders said on Wednesday.

The new appointments will come a week after George Osborne, the Chancellor, delivered an autumn statement in which he vowed to accelerate the pace of Government asset sales.

The remaining student loan-book, the Government's stake in Eurostar, the Royal Mint, the Met Office and other bodies are all expected to be prepared for disposal as ministers look to fund huge infrastructure investments in the coming decades.

Mark Russell, the ShEx chief executive, appeared alongside Mr Cable at a BIS select committee hearing last week, during which he defended the price at which the Government had sold 60% of Royal Mail.

In its annual report, published last month, ShEx insisted that it had shown "real strengths" in delivering the Royal Mail flotation.

"In challenging circumstances, and following years of failed attempts to privatise Royal Mail, ShEx delivered a sale of 60% of the shares in Royal Mail to a mix of long-term high-quality institutional investors and almost 700,000 members of the public," it said.

"Nearly £2bn was raised for the Exchequer, and the Government still holds a 30% stake in a company that has, as expected, increased in value following the introduction of private sector ownership."

ShEx will be responsible for supervising the sale of the taxpayer's remaining 30% shareholding in the postal operator.

During presentations to Government officials earlier this year, JP Morgan suggested that the company, which will enter the FTSE-100 index following a quarterly review later on Wednesday, could be worth more than £9.5bn including debt.

M&S and BIS declined to comment, while JP Morgan could not be reached.

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Heathrow Investor Lines Up UK Airports Deal

By Mark Kleinman, City Editor

The Spanish infrastructure giant which bought Heathrow Airport in a debt-fuelled deal seven years ago has lodged its interest in acquiring the company's remaining regional UK assets.

Sky News has learnt that Ferrovial has told the board of Heathrow Airport Holdings that it wants to buy Aberdeen, Glasgow and Southampton airports.

Heathrow's board, which is chaired by the City veteran Sir Nigel Rudd, is expected to formally consider the approach from Ferrovial during the first quarter of next year.

One of Heathrow's other minority shareholders is also understood to be interested in pursuing a deal, although it is unclear whether this would be in partnership with Ferrovial.

A decision to sell the airports would come amid a crucial Government-commissioned review being led by Sir Howard Davies, the former director of the London School of Economics, who will outline several options for expanding airport capacity in the South East next week.

Sir Howard is expected to narrow the field of options to around a handful, most of which will include a third runway at Heathrow.

With the direction of Sir Howard's thinking becoming clearer, several Heathrow Holdings shareholders and board members are keen to dispose of the three regional airports that are the last remaining remnants of the former BAA's monopoly over the UK's aviation infrastructure.

Sky News revealed last month that Global Infrastructure Partners, the owner of London City, Gatwick and Edinburgh airports is interested in adding Aberdeen to its portfolio.

Ferrovial, which took BAA private in 2006 in a debt-fuelled deal, has steadily reduced its investment in Heathrow in recent years by selling small chunks of shares to sovereign wealth funds in China, Qatar and Singapore.

In October, the Universities Superannuation Scheme, one of the UK's biggest pension fund managers, bought an 8.65% stake in Heathrow's holding company, a move which saw Ferrovial's shareholding lowered to 25%.

Ferrovial is now interested in acquiring Aberdeen, Glasgow or Southampton airports through a separate vehicle, with bankers suggesting that they would collectively command a price-tag of as much as £1.2bn.

Shortly after Ferrovial's takeover of BAA, competition authorities ordered the company to break itself up by selling Stansted, Gatwick and either Glasgow or Edinburgh, the latter of which was offloaded two years ago.

Manchester Airports Group, which now owns Stansted, is also a likely bidder for some of the Heathrow-owned airports, analysts believe.

Heathrow Airport accounts for more than 95% of its parent company's annual profits, making the sale of the other regional assets "inevitable" within the next three years, said one.

A Heathrow Airport Holdings spokesman declined to comment.

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