Lloyds to cut jobs in risk management after finding it was a ‘blocker’ to transformation progress

Lloyds Banking Group is preparing to axe roles in its risk management division after finding that it was a “blocker” to the company’s transformation strategy, City A.M. understands.

The group’s chief risk officer Stephen Shelley said in a memo last month that it was “resetting our approach to risk and controls” following an internal review.

Shelley noted that two-thirds of Lloyds’ executives thought risk management was impeding progress, while less than half of its workforce believed “intelligent risk-taking” was encouraged.

He said Lloyds’ “initial focus is on non-financial risks” and a new model would allow it to “move at greater pace” on its group strategy.

“We know people are frustrated by time-consuming processes and ingrained ways of working that impede our ability to be competitive and leave us lagging behind our peers,” Shelley added.

The Financial Times first reported the news.

A person familiar with the matter told City A.M. that the restructuring would see around 175 permanent roles at risk of redundancy, including 153 in the risk unit.

However, the person added that the lender expected to create 130 vacancies focused on specialist risk and technical expertise. Some 3,600 people currently work in Lloyds’ risk division.

Mark Brown, general secretary of independent employee union BTU, told the FT that Lloyds appeared to be “throwing the baby out with the bathwater” and that loosening its risk controls “could potentially have catastrophic consequences for the future of the bank”.

The news comes as Lloyds faces potential compensation costs tied to the Financial Conduct Authority’s (FCA) review into now-banned motor finance commission arrangements.

Analysts have said the probe could cost the auto lending sector as much as £16bn, while RBC has estimated that Lloyds could face the biggest hit of any bank at up to £3.5bn. Lloyds in February made a £450m provision to cover potential costs tied to the FCA’s review.

A Lloyds spokesperson told City A.M. on Wednesday: “Making changes means not only creating new roles and upskilling colleagues in some parts of the business but also having to say goodbye to talented colleagues who have been a part of the group’s success in the past.

“Where that is unfortunately the case, we will do everything we can to support them with the changes recently announced. In this case, there are around 45 role reductions, after new roles being created are factored in.”

Lloyds, which has around 60,000 total employees, launched a plan in February 2022 to invest £4bn over the next five years to diversify away from interest rate-sensitive income streams like mortgages and become a “digital leader”.

As part of its shift towards online services, the lender confirmed in January that it would cut around 1,600 jobs across its branch network and create 830 new roles in a “relationship growth” team.