Lloyds Banking Group, the partly UK state-owned group, has been fined a record £28 million ($45.8 million) by the Financial Conduct Authority for "serious failings" relating to its sales incentives, which resulted in a culture of mis-selling among advisors.

Lloyds Banking Group, the partly UK state-owned group, has been fined a record £28
million ($45.8 million) by the Financial Conduct
Authority for "serious failings" relating to its sales incentives, which
resulted in a culture of mis-selling among advisors.

The FCA said it was the largest ever fine imposed by it or its predecessor the Financial Services Authority for retail conduct failings.

The
regulator said that incentive schemes put sales staff under pressure to hit
targets to get a bonus or avoid being demoted, rather than focus on what
consumers may need or want.

In one
instance, an advisor sold protection products to himself, his wife and a
colleague to prevent himself from being demoted, the FCA said.

The
failings affected branches of Lloyds TSB, Bank of Scotland and Halifax.

The FCA's investigation
focused on advised sales of investment products, such as share ISAs and income
protection, between 1 January 2010 and 31 March 2012.

During this
period, more than 1 million products were sold
to around 700,000 customers, who invested just over £2 billion and paid £118
million in protection premiums.

Tracey
McDermott, the FCA's
director of enforcement and financial crime, said the fine had
been increased 10 per cent following numerous warnings to the industry about
the importance of managing incentives schemes. The bank was also fined in 2003
for the unsuitable sale of bonds.

“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," said McDermott.

“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
added.

Lloyds Banking Group said in
a statement that it had cooperated fully with the FCA throughout the
investigation and had already commenced a review to address potential
customer impacts that may have occurred as a result of the failings.

"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," Lloyds Banking Group said.

The fine comes on top of what has been a difficult period for the bank.

Lloyds was
bailed out by the British government in 2008 following the financial crisis to
save it from collapse and has been partly owned by the British taxpayer ever
since.

In its third quarter results, Lloyds Banking Group announced a pre-tax
loss of £440 million after setting aside a further £750 million in compensation
for the payment protection insurance mis-selling scandal, taking the overall figure
to roughly £8 billion.

Earlier this year, the bank was also fined £4.3 million by the FCA for failings causing late redress payments relating to payment protection insurance.

As part of the UK government's plan to return Lloyds to full private ownership, the bank has sold a number of its non-core assets to strengthen its balance sheet.

On Monday, Lloyds Banking
Group sold its remaining 21 per cent stake in wealth management firm St James's Place
for £680 million as part of its strategy to focus on its retail and commercial

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