Item 15 and 20: Remuneration policy and New Lloyds LTIP

Lloyds proposes to change its current performance-based LTIP to a restricted share grant with three performance underpins. The maximum opportunity will be reduced by 50% from the current 400% to 200%. The group aims to grant less volatile incentive better align to its long-term strategy.

The Committee will make a pre-grant test at its discretion, incorporating an assessment of risk and conduct. The second test will be made at vesting by assessing the three financial underpins, CET 1 Ratio, ROTE and Ordinary Dividend, equally weighted. Also, the Committee will consider applying a downward discretionary adjustment by asking itself whether any non-financial factors should be considered at vesting.

The number of shares to be awarded may be calculated using a fair value or based on a discount to market value, as appropriate.

ECGS policy does not support executive LTI without performance conditions and, especially, with a discount. We understand the need to simplify the current incentive, however, we do not consider appropriate restricted awards. We also note that Lloyds abandoned TSR condition, which vested only once in 2013. We consider that proposed LTIP will lead to additional, lower but guaranteed, executive pay in addition to already excessive fixed pay. The weight of remuneration which is not linked to the group's performance will become too important (base salary, fixed share allowance up to 100% of salary and LTI up to 200% of salary).