BoI chair Kane sees his bonus slashed in half
Ex-employer Lloyds hit for €7.9bn in PPI scandal
Bank of Ireland chairman Archie Kane's past has come back to haunt him. The banker had his bonus for 2010 halved last week by his former employer Lloyds Banking Group as it grappled with the fallout from the Payment Protection Insurance (PPI) mis-selling scandal that occurred as Mr Kane headed up the UK bank's insurance division.
The Scotsman left Lloyds in mid-2011 in what Reuters described as a "board room cull" as the PPI scandal threatened to engulf the British banking system. Lloyds has set aside over €7.9bn to cover the cost of the payouts.
The influential Which consumer magazine has described the rampant bilking of consumers as "the biggest financial mis-selling scandal of all time".
Lloyds and other British banks sold 34 million payment protection insurance policies to customers from 2001 onwards, with the banks now putting aside over €16.6bn to cover the cost of customer settlements. Lloyds has put aside by far the largest sum to cover its potential exposure to the scandal.
Mr Kane had been awarded a bonus of €907,000 by Lloyds in 2010. This bonus was in the form of shares deferred for three years. When the PPI scandal erupted last year, Mr Kane and four of his fellow top executives at Lloyds lost 25 per cent of the bonus.
Last week it emerged that Lloyds had clawed back even more of the bonus, taking a further 25 per cent of the banker's windfall. These two "clawbacks" mean that Mr Kane has lost over €453,000 from his €907,000 bonus.
Last week, Lloyds Banking Group's annual report showed that Mr Kane and some boardroom colleagues were hit again. The Lloyds remuneration committee "recommended to the board that it should exercise its discretion to adjust the value of certain 2010 bonus awards, on a basis equivalent to that applied in the previous year".
This is hugely embarrassing for Bank of Ireland and the man it chose to become its chairman following the departure of banking veteran Pat Molloy last year. Mr Kane joined the "court" or the board of Bank of Ireland last June, becoming "governor" or chairman of the bank shortly after. Mr Kane's experience running Lloyds Banking group's insurance division may come in useful to Bank of Ireland, which is facing a probe into the UK sales of PPI.
Two weeks ago, it emerged that Mr Kane receives a package worth around €490,000 from the bailed-out bank. This is made up of a €394,000 annual fee for his role as chairman with another €39,000 for "an accommodation, utilities and car allowance". The latest Bank of Ireland annual report shows that Mr Kane also earns an extra €59,000 from a "consultancy arrangement" with Bank of Ireland (UK) plc.
Last year, Bank of Ireland told shareholders that it had arranged an apartment in Dublin for its chairman. "Archie Kane has taken an apartment here in Dublin. He is committed to spending a number of days a week here (and has been doing so for the past number of weeks) in his non-executive role as Governor," according to the bank.
Bank of Ireland did not comment.