Lloyds Banking Group has reported it made a pre-tax loss of £6.3bn last year as bad debts escalated. The bank, which is 41% owned by the UK taxpayer, made losses of £24m on bad debts – much higher than those reported by RBS on Thursday.

Eric Daniels, Lloyds group chief executive gave up a potential £2.3m bonus, and this was in the wake of the revelation last week that Lloyds has a £200m staff bonus pool.

If Lloyds bonus reciepients qualify for the “payroll Tax” their contribution to the Treasury’s coffers through its tax on bank bonuses could be between £10m and £20m.

In a statement, the bank’s chief executive said that 2009 had been “another challenging year for the financial services industry”, but despite the tough market conditions, the bank’s core businesses had “performed well”.

I guess they are in it for the journey – more like a roller coaster that has yet to hit the up ramp!

HM Treasury (HMT) published a 48-page discussion paper entitled ‘Risk, reward and responsibility: the financial sector and society’ on 10 December 2009

The paper will be of interest to all persons working in the financial sector and maybe appealing to anybody with a more general interest in financial stability, regulation and supervision.

The recent global financial crisis has seemingly called into question the balance of risks, rewards and responsibilities between society and the financial sector, and has shown the inability of government to manage effectively withou a high cost to taxpayers when uncontrolled risk-taking for short term gain becomes excessive.

The G20 Finance Ministers and leaders have committed to implementing higher regulatory and supervisory standards to ensure greater cooperation, improve consistency and guard against excessive risks. The FSA have already issued PS09/15 Reforming remuneration practices in financial services

The G20 has asked the International Monetary Fund (IMF) to prepare a report on the range of options that countries have adopted to ensure that the financial sector makes a fair and substantial contribution to the costs of government interventions to repair trust in the banking system. This HM Treasury paper is intended to inform that review and to contribute to the wider international debate on these issues.

The paper considers ways in which the financial sector might contribute to the potential costs of any residual risks it poses to taxpayers and to broader social objectives. It points out that any solutions will need to be:

Global – some measures can only be implemented at a global level, while others require agreement and coordination on the principles as a minimum to be effective;

Non-distortionary – Damaging reductions in liquidity and inefficient allocation of capital must be avoided and the possibility of avoidance minimised;

Stability enhancing – Proposals must support and not undermine the regulatory action already being taken to enhance the stability of the international financial system and the global economy. This is likely to mean any option could not be implemented for several years;

Fair and measured – financial services must be able to continue to contribute to economic growth and any additional costs should be distributed fairly across the sector. A thorough assessment of the impact of measures on the financial sector must be conducted prior to implementation.

Ahead of the IMF report in April 2010, the UK Government will continue to work closely with international partners, the Financial Services Authority (FSA) and the Bank of England, and to engage with the financial sector to ensure that the recovery from the crisis is strong, sustainable and fair.

Full Article at Money Marketing http://www.moneymarketing.co.uk/1003654.article?cmpid=MME01&cmptype=newsletter

The Chancellor Alistair Darling announced the measure in his pre-Budget speech today.

BBA chief executive, Angela Knight says: ” The Chancellor’s comments on bonuses were well trailed and we now await the details.

“This new tax has to be set in the context of commitments already made. The UK’s banks have already agreed to observe pay restraints where bonuses are mostly deferred and paid in shares. We are already well ahead of the other G20 countries in doing this.”

Is this the start of “Britain HAD Talent”, as more banking executives move to other more appreciative countries?

Stephen Karle, the former West-Brom Building Society chief executive  received £520,600 as a pay-off in 2008 despite taking the firm to the brink of bankruptcy.

The Daily Telegraph reported that, Karle earned £686,600 during his seven months work, including a 13% bonus. He is also entitled to a pension from the age of 65 of £95,000 a year .

The West-Brom Group published a £48.8m pre-tax loss in June with £66m of bad debts. The Government stepped in when the firm was on the brink of insolvency with a new financial instrument to allow the firm to recapitalise.

Responding to publication of Sir David Walker‘s report into corporate governance of UK banks, Peter Montagnon, the ABI’s Director of Investment Affairs, said:

“This is a valuable contribution to the debate on the banking crisis. It represents the first stage in the process of improving governance. We support non-executive directors devoting more time to their role, having better induction and training, and being subject to rigorous performance evaluation. We also agree that more needs to be done on board accountability, for example, as Sir David suggests, through the annual re-election of the chairman.

“Much of what Sir David says is in line with the Institutional Shareholders Committee’s (ISC) statement on the responsibilities of institutional shareholders. We will, together with other ISC members, continue to work to turn the statement into a Code, which institutions may report against a comply-or-explain basis. However, we do not believe that the authorities should assess the level of compliance – this does not happen to companies under the Combined Code.

“In the area of collective engagement, we welcome Sir David’s view that the mechanism must be flexible and informal. Greater formality will reduce real outcomes and therefore such engagement should not be done through a bureaucratic framework.

“Some areas need further consideration and clarification. In particular, we do not believe that the remit of non-executive directors should be extended into areas that should be performed by management. And care should be taken that in strengthening the chairman’s role and requiring greater day-to-day involvement, it does not become too dominant. Therefore further consideration should be given to the role of the Senior Independent Director.”