A former banker has claimed staff in worked in a climate of fear and sold risky products to ill-informed customers - and rewarded themselves with champagne.
The disturbing inside story of claims that complex derivatives were sold in Birmingham to often unguarded customers is revealed in an extraordinary High Court document released to the Post.
Former banker-turned-whistleblower James Ducker has alleged aggressive sales tactics and a culture of fear which forced Lloyds staff to sell allegedly unsuitable products, often to financially-unsophisticated small traders.
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The Ducker High Court statement was issued 24 hours after Lloyds Banking Group was criticised by Bank of England Governor Mark Carney for "highly reprehensible" behaviour for rigging interest rates and ordered to pay £218 million.
Mr Ducker's claims, which centre on operations in Birmingham, were released by lawyers for Wolverhampton businessman Gary Hartland who is taking action against Lloyds for further recompense after his Wingate Associates investment group was allegedly mis-sold a rate swap product.
Mr Ducker, who left banking in 2010 and now runs a business called Benchmark Treasury Pricing helping victims of mis-selling, had provided a statement to the High Court for the Hartland company in its fight for compensation.
The case was eventually settled out of court, but Mr Hartland is now pursuing further redress in the wake of Lloyds' own settlement this week as part of the global investigation into the manipulation of and other inter-bank lending rates.
The Wolverhampton businessman has already settled with Barclays for £40 million in a separate action described as the 'Libor test case' which related to the alleged mis-selling of a rate swap product to his Graiseley Properties business.
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Mr Hartland, whose Bilbrook holding group covers care homes and property interests, said: "We have waived our without prejudice on this. I am ripping the terms of the settlement up and going public with this statement and taking further legal action to recover losses of £5 million.
"I have been fighting the banks for four years and I want my money. The banks need to be brought to task."
The Ducker testimony claims a climate of fear and pressure within the Lloyds team in Birmingham to ‘maximise profitability at the expense of customers' best interests' – and the champagne bonuses if targets were met.
In his statement to the High Court, Mr Ducker says: "I was based in the defendant's Birmingham region and I was responsible for the corporate clients located in the Dudley and Stoke geographical areas.
"In my first year in this role I increased the defendant's (Lloyds) profit in my geographical areas from £190,000 to £540,000. My work in this role involved selling to customers of the defendant, which were principally retail customers, such derivative products as interest rate swaps, caps, collars and more structured interest rate hedging and FX spot, forwards and options.
"In my second year I continued to build new and existing customer relationships and generated over £1 million profit for the defendant against a target of about £750,000."
Mr Ducker says he left Lloyds in September 2006 to work for HBOS – which was merged with Lloyds following the banking bailouts of October 2008 – amid "increasing concerns about the defendant's business practices".
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He says of his role within the Lloyds' treasury sales team in Birmingham: "I dealt predominantly with retail customers and small to medium-sized enterprises, like the claimant (Wingate Associates). These were largely entities that had little if any experience with these kind of derivative products.
"The culture of the bank as promulgated by senior management was that the treasury sales team was under immense pressure to sell derivatives and to generate profit. Anything that got in the way of that was avoided if possible."
Mr Ducker says the bank culture began to change around late 2005 and early 2006 when there was "increasingly a great push" within the bank to sell derivative products to its customers.
"In my time at the defendant, the emphasis was increasingly placed on the defendant making profits and rarely, if at all, on ensuring the customers' interests were properly protected," he added.
"Although not in any sense an official bonus, there was a custom in the Birmingham treasury sales team that ,if a product was sold that made a profit of more than £100,000, then everyone in the treasury sales team each got a bottle of champagne.
"The converse of the incentive offered in the form of the bonus was the fear, which I think all of us had and which senior management made no effort to dispel, that if our individual targets were not hit then we would not keep our jobs for long."
In his description of targeting customers, the Ducker document states: "We were indiscriminate and were concerned with selling as many derivative products to as many customers as possible so that we could meet our targets and therefore receive our bonuses.
"I do not recall anyone in Treasury being given any training regarding the selection of customers. The message from the target-driven culture created by senior management was clear: sell as many products as possible to whomever we could.
"During my employment with the defendant I raised a number of complaints and concerns regarding how it sold derivative products to customers."
He added: "I felt increasingly uncomfortable with the defendant's emphasis on driving profits to the exclusion of its customers' interests."
A Lloyds spokesperson said: "Whilst we do not believe any claim has yet been filed, it would be inappropriate to comment in detail, other than to state that the bank would contest any such claim vigorously."
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