Lloyds Banking Group Annual Report and Accounts 2021 69

Governance

Directors’ report
Chair’s introduction 70
UK Corporate Governance Code 71
Our Board 72
Group Executive Committee 74
Board leadership and company purpose 76
Division of responsibilities 82
Composition, succession and evaluation 83
Audit, risk and internal control 86
Committee reports
Nomination and Governance Committee report 87
Audit Committee report 90
Board Risk Committee report 94
Responsible Business Committee report 100
Directors’ remuneration report 101
Other statutory and regulatory information 130

Governance
Helping rebuild households’ financial health
and wellbeing
The Group is committed to supporting the financial
health and wellbeing, and improving the financial
resilience, of our customers.

As part of our commitment to Helping Britain

Recover, we have continued to invest in supporting
customers facing financial difficulties and at the
beginning of the year we had over 6,500 colleagues
trained to support customers to build their
financial resilience.

We strengthened our relationships with free

independent debt advice organisations by building
these connections into our digital journeys and
colleague tools, providing over 133,000 of our
customers with easy access to additional practical
support. In doing so, we have helped over 267,000
customers by putting in place plans and treatments,
bespoke to suit their circumstances across both
unsecured and secured lending, supporting
them with their long-term and short-term financial
wellbeing needs.

Further information can be found in our ESG Report

available at www.lloydsbankinggroup.com/who-we-are/
responsible-business/downloads
70 Lloyds Banking Group Annual Report and Accounts 2021

Chair’s introduction

Focusing on good governance as I would also like to thank William for taking
on the interim role. Harmeen Mehta joined
the Board as a Non-Executive Director on
we develop our new strategy 1 November 2021.

Sara Weller retired as Chair of the

Responsible Business Committee and as a
Non-Executive Director at the Company’s
The Board remains focused on AGM in May 2021 after nine years on the
good governance and stakeholder Board and was succeeded in the role
engagement as fundamental to of Chair of the Responsible Business
Committee by Amanda Mackenzie.
the Group’s role in Helping Britain Nick Prettejohn stepped down as a
Recover from the effects of the Non-Executive Director of the Group and
pandemic. as Chair of Scottish Widows Group on
30 September 2021 after more than seven
Robin Budenberg years on the Board. Sara and Nick made
Chair significant contributions to the Board and
left with our thanks and best wishes.

In March 2021, membership of the Board

Risk Committee was streamlined so
that, as is the case with our other Board
Committees, a number of Non-Executive
Directors, but not all, are now members.

Stuart Sinclair stepped down from his role

as Chair of the Remuneration Committee in
November 2021 and was succeeded in that
2021 saw a change in leadership for us Leading on culture role by Alan Dickinson. Stuart has notified
as Charlie Nunn was appointed Group This year the Board played an active role
Chief Executive, bringing renewed the Board that he will retire from the Board
in leading the development of a healthy, at the Company’s AGM in May 2022.
passion and commitment to our purpose values-led culture. Further information
as well as his own vision for the Group. Full details of the Board and Committee
on the Board’s role in assessing, changes are set out on page 87.
The Board has revisited the role of the monitoring and providing oversight of the
Group’s overarching purpose, Helping development of the Group’s values-led
Britain Prosper, and has considered how culture can be found on page 80. Ring-fencing governance
to embed our purpose further across Although this is Lloyds Banking Group plc’s
business activities to help tackle the social Corporate Governance Report, I would like
and economic issues facing the UK. Under An inclusive and diverse to thank Nigel Hinshelwood, Sarah Bentley
Charlie’s leadership we have developed organisation and Brendan Gilligan for their valuable
the Group’s strategy in line with this Driving inclusion and diversity at contribution as Non-Executive Directors of
purpose and in response to changing Board and throughout all levels of the Lloyds Bank plc and Bank of Scotland plc
customer needs and expectations. organisation is a key area of focus for the (the Ring-Fenced Banks), which represent
Board. This year, the Board approved the the majority of the Group’s banking
The Board remains focused on good Group’s updated diversity policy – more activities. Further details regarding the
governance and stakeholder engagement information on the Board’s approach to Group’s ring-fencing arrangements and
as fundamental to the Group’s role in inclusion and diversity is set out the critical role these Directors play in the
Helping Britain Recover from the effects on page 89. Group’s overall governance structure are
of the pandemic. Oversight of Charlie’s set out on page 81.
transition into his role has been a focus for Succession planning
the Board in 2021, together with the other
key corporate governance activities set
Succession planning is an important Board evaluation
component of good governance and is Given the appointment of a new Group
out below. vital to ensure an appropriate mix of skills, Chief Executive and the Group’s ongoing
experience and backgrounds at Board and strategy development, the Board agreed
Stakeholder engagement senior management level. Further details that an evaluation of its effectiveness will
The Board recognises the importance on the Board’s approach to succession be conducted in 2022 instead of in 2021
of engaging with all its stakeholders. planning can be found on pages 87 in order to allow the review to cover the
Meeting the Group’s responsibilities and 89. Board’s effectiveness in overseeing these
and duties to shareholders and the developments. Further information on this
communities we serve is central to our Board and Committee changes process can be found on page 85.
purpose. Further details on how the Board There have been several changes to the
takes account of stakeholder interests are
set out on pages 26 to 29.
Board and its Committees during 2021. Corporate Governance Code
The Company’s statement of compliance
Charlie Nunn’s appointment as Group with the UK Corporate Governance Code
Board oversight of new strategy Chief Executive and Executive Director 2018 can be found on page 71.
The Board has been heavily involved with started on 16 August 2021. William
the development of the Group’s new Chalmers, Chief Financial Officer, took on
strategy. Further information on the key the role of acting Group Chief Executive
Robin Budenberg
Board discussions during 2021 and early when Sir António Horta-Osório stepped
Chair
2022 can be found on page 79. down in April pending Charlie’s arrival.
António made a tremendous contribution
to the Group during his tenure and left
with our thanks and best wishes.
 Lloyds Banking Group Annual Report and Accounts 2021 71

UK Corporate Governance Code

Compliance statement and, since the most recent externally
The UK Corporate Governance Code 2018 facilitated evaluation was in 2018, there Corporate governance
(the Code) applied to the financial year will be a gap of more than three years headlines at a glance
ended 31 December 2021. The Code is between external evaluations. The Board
available at www.frc.org.uk. confirms there will be an evaluation in Dividends
2022, which it anticipates will be externally
The Directors’ report is set out in a way
that helps shareholders and investors to
evaluate how the Company has applied
facilitated. Further information is on
page 85. 2.00p
Ordinary dividend per share for the
the principles, and complied with the Provision 36 of the Code provides that the
financial year ended 31 December 2021
provisions, of the Code during the year. remuneration committee should develop
a formal policy for post-employment including interim and final dividend
The table below signposts the most
relevant parts of the Annual Report, in shareholding requirements encompassing
particular where supporting information both unvested and vested shares. The
is not in the Directors’ report. Group has implemented a formal policy Board tenure
for post-employment shareholding As at 31 December 2021
The Company confirms that it applied requirements with effect from 1 January
the principles, and complied with all the 2022 and so has complied with the Code 0–2 years 4
provisions, of the Code throughout the provision since that date, but did not 2–4 years 3
year except as set out below. comply in 2021 as there was no specific 4–6 years 2
formal policy in place. However, the 6–8 years 1
Provision 21 of the Code provides that an Group believes that its post-employment
annual evaluation of the Board should be shareholding arrangements in place
undertaken and that the evaluation should during 2021 complied with best practice
be externally facilitated at least every and with the spirit of the Code provision.
three years. The Board decided to delay For details of the Group’s shareholding
the evaluation for 2021 until 2022 for the policy and post-employment shareholding Our progress against the Hampton-

Governance
reasons set out on page 85 and therefore requirements, please see page 102 of the Alexander review target of 33%
there was no annual evaluation in 2021 Directors’ remuneration report. for female Board representation¹
%

2021 40
Principles of the Code 2020 33
2019 31
2018 25
1. Board leadership and company purpose (pages 76 to 81) Page(s)
Chair’s introduction 70 1 As at 31 December of the relevant year. The
percentage for 2021 remains correct as at the
Our Board 72 to 73 date of publication of the Annual Report.
Purpose, values and strategy 02 to 25
Culture 22 to 23, 26 and 29 Met the Parker Review target for at
Board stakeholder engagement and decision-making 26 to 29 least one Board member from a Black,
Key performance indicators and strategic performance 30 to 36 Asian or minority ethnic background
Risk assessment 37 to 43 throughout the year1
Risk management 134 to 193 Number (%)
Rewarding our workforce 101 to 129
White 8 (80%)
Black, Asian
2. Division of responsibilities (page 82)
or minority
Our Board and governance structure 76 ethnic 2 (20%)
Board independence and time commitments 88
Committee reports 87 to 102 and 117
Board and Committee meeting attendance 77

3. Composition, succession and evaluation (pages 83 to 85) 1 As at 31 December 2021 and remains correct as
Our Board 72 to 73 at the date of publication of the Annual Report.
Our Board and governance structure 76
Board and Committee meeting attendance 77 Independence of the Board¹
Nomination and Governance Committee report 87 to 89 (excluding the Chair)

4. Audit, risk and internal control (page 86) Independent 7

Executive 2
Audit Committee report 90 to 93
Statement of Directors’ responsibilities 133
Risk management 134 to 193
Principal risks and emerging risks 38 to 42
Board Risk Committee report 94 to 99
Going concern 43
Viability statement 43 1 Board members as at 31 December 2021 and
remains correct as at the date of publication of
5. Remuneration the Annual Report.

Directors’ remuneration report 101 to 121

Other remuneration disclosures 122 to 129
72 Lloyds Banking Group Annual Report and Accounts 2021

Our Board

Overseeing our new strategy

Robin Budenberg CBE Alan Dickinson Sarah Legg

Chair Deputy Chair and Senior Independent Non-
Independent Director Executive Director

NG Re RB Re A Ri NG RB A Ri RB

Appointed: October 2020 (Board), Appointed: September 2014 (Board), Appointed: December 2019
January 2021 (Chair) December 2019 (Senior Independent Director), Skills, experience and contribution:
Skills, experience and contribution: May 2020 (Deputy Chair) Strong financial leadership and regulatory
Extensive financial services and investment Skills, experience and contribution: reporting skills
banking experience Highly regarded retail and commercial Significant audit and risk experience in
Strong governance and strategic advisory banker financial leadership
skills to companies and government Strong strategic, risk management and core Strong transformation programme
Regulatory, public policy and stakeholder banking experience experience
management experience Regulatory and public policy experience Sarah has spent her entire career in financial
Robin spent 25 years advising UK companies Alan has 37 years’ experience with the Royal services with HSBC in finance leadership
and the UK Government while working for Bank of Scotland, most notably as Chief roles. She was the Group Financial Controller,
S.G. Warburg/UBS Investment Bank, and was Executive of RBS UK. Alan was formerly a Group General Manager, and also Chief
formerly Chief Executive and Chairman of Chairman of Urban&Civic plc and of Brown, Financial Officer for HSBC’s Asia Pacific region.
UK Financial Investments (UKFI), managing Shipley & Co. Limited, a Non-Executive She also spent eight years as a Non-Executive
the Government’s investments in UK banks Director and Chairman of the Risk Committee Director on the board of Hang Seng Bank
following the 2008 financial crisis. He was of the Nationwide Building Society and of Willis Limited, a Hong Kong listed bank.
awarded a CBE in 2015 for services to the Limited, and a Governor of Motability. Alan is a External appointments:
taxpayer and the economy, and is a qualified Fellow of the Chartered Institute of Bankers and Chair of the Campaign Advisory Board, King’s
Chartered Accountant. the Royal Statistical Society. College, Cambridge University, Honorary
External appointments: External appointments: Vice President of the Hong Kong Society for
Chairman of The Crown Estate. Non-Executive Director of the England and Rehabilitation and a trustee of the Lloyds Bank
Wales Cricket Board. Foundation for England and Wales.

Lord Lupton CBE Amanda Mackenzie OBE Harmeen Mehta

Independent Non- Independent Non- Independent Non-
Executive Director and Executive Director Executive Director
Chair of Lloyds Bank
Corporate Markets plc

RB RB Re NG

Appointed: June 2017 Appointed: October 2018 Appointed: November 2021

Skills, experience and contribution: Skills, experience and contribution: Skills, experience and contribution:
Extensive international corporate Extensive experience in ESG matters, Extensive experience leading digital,
experience, especially in financial markets including responsible business and engineering, IT and innovation
Strong board governance experience, sustainability transformation
including investor relations and Considerable customer engagement A wealth of international and financial
remuneration experience services knowledge having lived in 11
Regulatory and public policy experience Strong digital technology experience countries and worked across 30 countries in
Significant experience in strategic planning Significant marketing and brand her career
and implementation background Experience of incubating new businesses
Lord Lupton was Deputy Chairman of Baring Amanda was a member of Aviva’s Group and creating new revenue streams in
Brothers, co-founded the London office of Executive for seven years as Chief Marketing businesses
Greenhill & Co., and was Chairman of Greenhill and Communications Officer and was Harmeen was appointed Chief Digital and
Europe. He is a former Treasurer of the seconded to help launch the United Nation’s Innovation Officer at BT in April 2021. Prior to
Conservative Party and became a Life Peer in Sustainable Development Goals. She is also a that role, she spent seven years as Global Chief
October 2015, serving on the House of Lords former Director of British Airways AirMiles, BT, Information Officer and Head of Cyber Security
Select Committee on Charities. Hewlett Packard Inc and British Gas. and Cloud Business at Bharti Airtel, leading its
External appointments: External appointments: cloud and security businesses. Earlier in her
Senior Advisor to Greenhill Europe, a Trustee Chief Executive of Business in the Community, career, Harmeen held CIO positions at BBVA,
of The Lovington Foundation and Chairman The Prince’s Responsible Business Network. HSBC and Bank of America Merrill Lynch.
of the Board of Visitors of the Ashmolean External appointments:
Museum. Chief Digital and Innovation Officer at BT; Non-
Executive Director at Max Healthcare.
 Lloyds Banking Group Annual Report and Accounts 2021 73

Stuart Sinclair Catherine Woods Kate Cheetham

Independent Non- Independent Non- Group General Counsel
Executive Director Executive Director and Company Secretary

Re NG RB Ri A Re

Appointed: January 2016 Appointed: March 2020 Appointed: July 2019

Skills, experience and contribution: Skills, experience and contribution: Skills and experience:
Extensive experience in retail banking, Extensive executive experience of Kate became Group General Counsel in
insurance and consumer finance international financial institutions May 2015 and Group Company Secretary
Significant experience in strategic planning Deep experience of risk and transformation in July 2019. Kate joined the Group in 2005
and implementation oversight from Linklaters, where she was a corporate
Experience in consumer analysis, marketing Strong focus on culture and corporate lawyer specialising in mergers and
and distribution governance acquisitions transactions. Before her current
Stuart is a former Non-Executive Director Catherine is a former Deputy Chair and Senior roles, Kate held a number of senior positions
of TSB Banking Group plc, LV Group and Independent Director of AIB Group plc where including Deputy Group General Counsel
Virgin Direct. He was previously the Interim she also chaired the Board Audit Committee. In and General Counsel for Group Legal. Kate
Chairman of Provident Financial plc, Senior her executive career with J P Morgan Securities, is a trustee of the Lloyds Bank Foundation

Governance
Independent Director of Swinton Group and of she was Vice President, European Financial for England and Wales.
QBE and a Council Member, Chatham House. Institutions, Mergers and Acquisitions, and
In his executive career, he was President and Vice President Equity Research Department,
Chief Operating Officer of Aspen Insurance, forming the European Banks Team.
President of GE Capital China, Chief Executive External appointments:
Officer of Tesco Personal Finance and Director Non-Executive Director of Beazley plc and
of UK Retail Banking at the Royal Bank of Non-Executive Director and Deputy Chair of
Scotland. BlackRock Asset Management Ireland Limited.
External appointments:
Chairman of International Personal Finance plc
and of Willis Limited.
Key1

Charlie Nunn William Chalmers A Audit Committee member

Executive Director and Executive Director and Ri Board Risk Committee member
Group Chief Executive Chief Financial Officer Re Remuneration Committee member

RB Responsible Business Committee member

NG Nomination and Governance Committee member

Committee Chair

New to the Board in 2021

Appointed: August 2021 Appointed: August 2019 (Chief Financial
Existing Board member
Skills, experience and contribution: Officer), May-August 2021 (Interim Group
Extensive financial services experience Chief Executive) 1 Committee Chairs and members shown as at
23 February 2022
including in Chief Executive and other Skills, experience and contribution:
leadership roles Significant board-level strategic and Each of the Directors of Lloyds Banking
Strategic planning and implementation financial leadership experience Group plc is also a director of Lloyds Bank
Extensive experience of digital transformation Strategic planning and development, plc and Bank of Scotland plc (Ring-Fenced
Charlie has over 25 years’ experience in the mergers and acquisitions, equity and debt Banks). The boards of the Ring-Fenced
financial services sector. Prior to joining the capital structuring and risk management Banks have three additional Non-Executive
Group, Charlie held a range of leadership William joined the Board in August 2019, when Directors, Nigel Hinshelwood (Senior
positions at HSBC, including Global Chief he was appointed Chief Financial Officer, and
Independent Director), Sarah Bentley and
Executive, Wealth and Personal Banking, and was appointed Interim Group Chief Executive
Brendan Gilligan. Read their biographies
Group Head of Wealth Management and from May 2021 to August 2021.
and about the Ring-Fenced Banks on pages
Digital, as well as Global Chief Operating William has worked in financial services for
Officer of Retail Banking and Wealth 77 and 81.
over 25 years, and previously held a number
Management. of senior roles at Morgan Stanley, including
Charlie began his career at Accenture, where Co-Head of the Global Financial Institutions Other Lloyds Banking Group plc Board
he worked for 13 years in the US, France, Group and Head of EMEA Financial Institutions members in 2021, with retirement dates
Switzerland and the UK before being made a Group. Before joining Morgan Stanley, William • Lord Blackwell (Chair) – 1 January 2021
Partner. He then moved to McKinsey & Co. as a worked for JP Morgan, again in the Financial • Sir António Horta-Osório (Group Chief
Senior Partner, leading on projects for five years. Institutions Group.
Executive) – 30 April 2021
External appointments: External appointments: • Sara Weller – 20 May 2021
None. None. • Nick Prettejohn – 30 September 2021
(both Non-Executive Directors)
74 Lloyds Banking Group Annual Report and Accounts 2021

Group Executive Committee

Delivering our vision and day-to-day management

C M A

Charlie Nunn William Chalmers Kate Cheetham

Executive Director and Executive Director and Group General Counsel and
Group Chief Executive Chief Financial Officer Company Secretary

Appointed: Charlie joined the Appointed: William joined Appointed:

Board as an Executive Director the Board in August 2019 as Kate became Group General
and Group Chief Executive an Executive Director and the Counsel in May 2015 and Group
in August 2021. Read his Chief Financial Officer. Read his Company Secretary in July
biography on page 73. biography on page 73. 2019. Read her biography on
page 73.

A A M M

Carla Antunes da Silva Paul Day Dave Gledhill Antonio Lorenzo

Group Strategy, Corporate Chief Internal Auditor Chief Operating Officer Chief Executive, Scottish
Development and Investor Widows and Group Director,
Relations Director Insurance and Wealth

Appointed: June 2018 Appointed: September 2016 Appointed: August 2021 Appointed: March 2011
Skills and experience: Skills and experience: Skills and experience: Skills and experience:
Carla joined the Group in October Paul joined the Group in June Dave joined the Group in Antonio joined the Group in 2011
2015 and since then has led the 2017 as Chief Internal Auditor. He August 2021 as the Group Chief and is currently responsible for
Group’s strategic review work joined from Deloitte where Paul Operating Officer, and also serves the insurance, investment and
and the development of ongoing was a partner in the UK Financial on the Board of Singapore Airlines wealth management businesses.
strategic priorities. As part of her Services practice and led the UK and the National University of Antonio is also Chairman of
role, Carla is responsible for the Financial Services Internal Audit Singapore (NUS) Institute of Schroders Personal Wealth and a
recommendations on the Group’s business. Paul has specialised in Systems Science. Board member of the Association
mergers, acquisitions/disposals internal and external audit roles Dave has over 30 years of of British Insurers. Prior to his
and corporate ventures, and across financial services for over experience in the financial sector current role, Antonio led Group
oversees the Group’s relationships 20 years, including 10 years in and has held senior leadership Corporate Development,
with shareholders, analysts and various leadership roles in Barclays positions in large financial Group Strategy and the former
the wider investment community. Internal Audit. institutions. This includes 11 Consumer Finance Division.
Since 2018, Carla has also been a years as Group Chief Information Antonio also led the IPO and
Non-Executive Director of Lloyds Officer and Head of Group divestment of TSB and reshaped
Bank Corporate Markets plc. Technology and Operations at the Group’s international
DBS, where he oversaw the bank’s presence. Before joining the
digital transformation. Group, Antonio was Chief
Financial Officer of Santander UK.
 Lloyds Banking Group Annual Report and Accounts 2021 75

M M M M

Vim Maru David Oldfield Janet Pope Stephen Shelley

Group Director, Retail Group Director, Chief of Staff and Group Chief Risk Officer
Commercial Banking Director, Sustainable Business

Appointed: September 2013 Appointed: May 2014 Appointed: January 2015 Appointed: September 2017
Skills and experience: Skills and experience: Skills and experience: Skills and experience:
Vim joined the Group in 2011 David was appointed Group Janet joined in 2008 to run the Stephen was appointed Chief
and is responsible for Retail Director and CEO, Commercial Group’s Savings business. Janet Risk Officer in September 2017.
products and distribution, Banking in September 2017 was previously Chief Executive Stephen is the Group’s Executive
customer services and brands responsible for supporting clients at Alliance Trust Savings and EVP Sponsor for Gender Diversity
and marketing. Vim has worked in from SMEs through to Corporate Global Strategy at Visa. Janet and Equality. Stephen joined
financial services for over 20 years and Institutional clients. More held a variety of roles at Standard the Group in May 2011 as Chief
and prior to joining the Group, recently, David took on the Chartered Bank including Retail Credit Officer for Wholesale
spent 12 years at Santander additional role of interim Group Banking MD for Africa and Non- and International. In October

Governance
UK in a range of roles. Vim is a Chief Operating Officer. David Executive Director positions 2012 he became Risk Director,
Chartered Accountant, and sits on started his career with Lloyds at Standard Chartered Bank Commercial Banking Risk.
the FCA’s Practitioner Panel and Bank in 1984 on the graduate Zimbabwe, Kenya, Zambia and Previously Stephen was Chief Risk
supports HM Treasury’s Financial programme and has held key Botswana. Janet is Chair of the Officer at Barclays Corporate, and
Inclusion Policy Forum and the leadership roles across the Group Charities Aid Foundation Bank, prior to that Chief Credit Officer
Money and Pensions Service including in Commercial, Retail, IT a Trustee of the Charities Aid UK Retail and Corporate. In his 21-
Advisory Group. and Central Functions. David is a Foundation, a Non-Executive year career at Barclays, Stephen
Fellow of the Chartered Institute Director of the Financial Services undertook a variety of roles in the
of Bankers, Group Executive Culture Board and is the Group’s front office and risk.
Sponsor for Disability and Chairs Executive Sponsor for Sexual
the Wellbeing leadership group Orientation and Gender Identity.
for Business in The Community.

A M A

Key to Committees
Matt Sinnott Andrew Walton Nick Williams
C Group Executive Committee Chair
Group People and Property Group Corporate Group Director, Transformation
Director Affairs Director M Group Executive Committee Member

A Group Executive Committee Attendee

Appointed: April 2020 Appointed: September 2018 Appointed: April 2021
Skills and experience: Skills and experience: Skills and experience:
Matt was appointed as Group Andrew joined the Group in Nick is responsible for all
People and Property Director September 2018, as Group Group-wide Transformation and
in April 2020 and is responsible Corporate Affairs Director, strategic change programmes.
for the Group’s strategy on with responsibility for internal Nick joined the Group in 2006
skills, culture, and the future of and external communications, from Accenture, where he
work and the workplace. Matt reputation management and worked in their Financial Services
joined the Group in early 2017 public affairs. Prior to joining Consulting Practice developing
as Reward Director, Governance the Group, Andrew was Senior and executing strategic business
and Executive Reward, and was Managing Director and Global and technology change working
subsequently promoted to Group Head of Financial Services for with businesses such as RSA,
Reward Director in October 2017. the strategic communications Prudential, AXA, and Barclays.
Prior to joining the Group, Matt segment of FTI Consulting. Throughout his career, Nick has
held senior positions in specialist built extensive experience in
reward, finance and broader HR leading digital and transformative
roles across a number of Financial change in complex organisations.
Services companies, including Nick is a Non-Executive Director
RBS, Nomura International and of the Mersey Care NHS Trust.
Merrill Lynch.
76 Lloyds Banking Group Annual Report and Accounts 2021

Board leadership and company purpose

The role of the Board The Group’s role as a trusted and to meet agreed objectives and strategy,
The Board is collectively responsible for sustainable business is central to its and ensures such resources are responsibly
the long-term, sustainable success of the purpose, with the Board’s Responsible and effectively deployed. The effective
Group, ensuring due regard is paid to the Business Committee overseeing the management of risk is central to the
interests of the Group’s stakeholders and Group’s sustainability ambitions. Read more Group’s strategy, supported by the Group’s
to the Group’s contribution to about the Responsible Business Committee enterprise risk management framework,
wider society. on page 100 and about the Group’s which is discussed in the risk management
approach to being a responsible business in report on pages 134 to 193.
The Board establishes the Group’s the Lloyds Banking Group ESG Report 2021.
purpose, values and strategy. As part of The Board recognises that engaging
the development of the Group’s strategy, The Board is also responsible for ensuring with, and acting on the needs of, the
the Board has revisited the role of purpose that the Group’s culture is aligned with Group’s stakeholders is key to achieving
in the Group’s strategy and considered its purpose, values and strategy. Read the strategy and long-term objectives of
how to continue to better align the more about how the Board assesses and the Company. Read more about how the
Group’s business with its purpose. Read monitors the Group’s culture on page 80. Board engages with stakeholders and
more about the Board’s engagement the Directors’ statement of compliance
in the development of the Group’s new The Board retains ultimate responsibility with their duties under section 172 of the
strategy on page 79. for ensuring adequate resource is available Companies Act 2006 on pages 26 to 29.

Our Board and governance structure

Lloyds Banking Group plc Board

Chair Executive Directors Non-Executive Directors Group Company

Robin Budenberg Group Chief Chief Financial Deputy Chair and Sarah Legg Secretary
Executive Officer Senior Independent Lord Lupton Kate Cheetham
Charlie Nunn William Chalmers Director Amanda Mackenzie
Alan Dickinson Harmeen Mehta
Stuart Sinclair
Catherine Woods
Group Chief
Executive
Committees
See more on
pages 138 to 140

Nomination Audit Board Risk Remuneration Responsible

and Governance Committee Committee Committee Business
Board Committees

Committee Committee
See more on See more on See more on See more on See more on
pages 87 to 89 pages 90 to 93 pages 94 to 99 pages 101 to 102 page 100
and 117

The key decisions and matters reserved Each Board Committee comprises executive committees established to
for the Board’s approval, such as the Non-Executive Directors only and has an support the Group Chief Executive (Group
Group’s long-term strategy and priorities, experienced Chair. The Committees are Chief Executive Committees), in particular
are set out in the Group’s Corporate managed on the same basis as the Board. the Group Executive Committee.
Governance Framework, which is reviewed The structure of each Committee seeks to Read about the Group Chief Executive
periodically by the Board. The Board facilitate open discussion and debate, and Committees on pages 138 to 140 and
is supported by its Committees which ensure adequate time for Committees’ the biographies of the Group Executive
make decisions and recommendations members to consider all proposals. Committee members and attendees on
on matters delegated to them under pages 74 to 75.
the Corporate Governance Framework, The Executive Directors make decisions
including Board appointments, the within the parameters and principles The terms of reference for the Board
effectiveness of internal controls and the set out in the Corporate Governance Committees and the matters reserved for
risk management framework, financial Framework, which aims to ensure that the Board can be found at
reporting, governance, and remuneration decisions are made by management www.lloydsbankinggroup.com/who-we-are/
issues. This enables the Board to spend under the correct authority. However, group-overview/corporate-governance
a greater proportion of its time on where appropriate, any activity can
strategic, forward-looking matters. Read be brought to the full Board for
more about the Corporate Governance consideration, even if the matter falls
Framework on page 88. within agreed parameters. There are
 Lloyds Banking Group Annual Report and Accounts 2021 77

Board meetings in 2021 Group’s governance structure and ring- Directors to make the right decisions.
There were 10 Board meetings in 2021. fencing governance arrangements at the The Chair leads the process, assisted by
There are separate boards and board bottom of this page and on page 81. the Group Chief Executive and Group
committees of Lloyds Banking Group Company Secretary. The process ensures
plc, Lloyds Bank plc, Bank of Scotland Regular updates are provided to the that sufficient time is being set aside for
plc and HBOS plc, but most meetings of Board by the Committee Chairs as well as strategic discussions and business critical
these companies are held concurrently by the Chair, the Group Chief Executive, items. The Chair and the Committee
and we refer to this as the ‘Aligned Board the Chief Financial Officer, the Chief Chairs ensure Board and Committee
Model’. As most of the Group’s business Risk Officer, and the Chairs of the Lloyds meetings are structured to facilitate open
sits within Lloyds Bank plc and Bank of Bank Corporate Markets plc and Scottish discussion, debate and challenge.
Scotland plc (together, the Ring-Fenced Widows Group Limited boards.
Banks), the interests of the Ring-Fenced The process of escalating issues and
Banks and the Group are aligned in most The Chair also held a number of meetings agenda setting is regularly reviewed
circumstances. This model is supported with the Non-Executive Directors without as part of the Board evaluation with
by a number of safeguards to enable the Executive Directors present. enhancements made to the process,
us to operate in this way including the where necessary, to ensure it
appointment of three Ring-Fenced Bank- The Group has a comprehensive and remains effective.
only Non-Executive Directors and a Ring continuous agenda setting and escalation
Fenced Bank Risk Officer, all of whose process in place to ensure that the Board The Non-Executive Directors also receive
focus is on protecting the interests of the has the right information at the right time regular updates from management to give
Ring-Fenced Banks. Read more about the and in the right format to enable the context to current issues.

Board and Committee composition and attendance at meetings in 202113 C Chair

Nomination Responsible

Governance
and Governance Audit Board Risk Remuneration Business
Board member Board Committee Committee Committee Committee Committee

Robin Budenberg1 10/10 C 6/6 C 2/2 6/6 4/4

Charlie Nunn 2
4/4
Sir António Horta-Osório 3
3/3
William Chalmers 4
10/10
Alan Dickinson5 10/10 6/6 6/6 8/8 6/6 C 4/4
Sarah Legg 6
10/10 6/6 C 8/8 3/3
Lord Lupton 1
10/10 2/2 4/4
Amanda Mackenzie1,7 10/10 4/4 2/2 6/6 4/4 C

Harmeen Mehta8 2/2

Nick Prettejohn 9
7/7 4/4 5/5 6/6
Stuart Sinclair 1,5,10
8/10 12
5/6 12
2/2 4/612 4/4
Sara Weller1,11 4/4 2/2 2/2 4/4 2/2
Catherine Woods 10/10 6/6 8/8 C 6/6

1 The Board Risk Committee was reconstituted with effect from 29 March 2021 to 7 Amanda Mackenzie succeeded Sara Weller as Chair of the Responsible
streamline that Committee’s membership. With effect from 29 March 2021, the Business Committee on 20 May 2021 and joined the Nomination and
Committee comprised Catherine Woods (Chair), Alan Dickinson, Sarah Legg and, Governance Committee on 23 June 2021.
until his retirement from the Board, Nick Prettejohn. 8 Harmeen Mehta joined the Board on 1 November 2021.
2 Charlie Nunn joined the Board on 16 August 2021. 9 Nick Prettejohn retired from the Board on 30 September 2021.
3 Sir António Horta-Osório retired from the Board on 30 April 2021. 10 Stuart Sinclair plans to retire from the Board at the AGM in May 2022.
4 William Chalmers, Chief Financial Officer, was acting Group Chief Executive from 11 Sara Weller retired from the Board on 20 May 2021.
when Sir António Horta-Osório retired on 30 April 2021 and until Charlie Nunn’s 12 Unable to attend some meetings due to medical reasons.
appointment to the Board on 16 August 2021. 13 Where a Director is unable to attend a meeting he/she receives papers in
5 Alan Dickinson succeeded Stuart Sinclair as Chair of the Remuneration advance and has the opportunity to provide comments to the Chair of the
Committee on 24 November 2021. Board or to the relevant Committee Chair.
6 Sarah Legg joined the Responsible Business Committee on 1 February 2021.

Spotlight on the Ring-Fenced Banks

All of the Lloyds Banking Group plc • Sarah Bentley – Non-Executive Director, Since the Ring-Fenced Banks represent
Directors sit on the boards of the and a member of the Remuneration the majority of the banking activities of the
Ring-Fenced Banks together with three Committee, of the Ring-Fenced Banks Group, Nigel Hinshelwood, Sarah Bentley
additional Non-Executive Directors: • Brendan Gilligan – Non-Executive and Brendan Gilligan play an important
• Nigel Hinshelwood – Senior Director, and a member of the Audit and role in the Group’s overall governance
Independent Director, and a member Board Risk Committees, of the Ring- structure. Read their biographies and
of the Audit, Remuneration, Board Risk Fenced Banks more about the Group’s structure and
and Nomination Committees, of the ring-fencing governance arrangements
Ring-Fenced Banks on page 81.
78 Lloyds Banking Group Annual Report and Accounts 2021

Board leadership and company purpose continued

Key focus areas

This page shows some of the key focus Stakeholders

areas of the Board during 2021 and Customers Community and environment

highlights the stakeholder groups Colleagues Shareholders

central to those matters considered Suppliers Regulatory and government

and decisions taken

Key focus areas for 2021

Matters approved Other matters considered/undertaken Stakeholders

Culture and • Helping Britain Prosper Plan update • Operational effectiveness of the
values (including the focus on Helping remuneration policy
Britain Recover) • Future ways of working and culture –
• Human rights policy statement please read more on page 29
• Workforce engagement 2021 • In-depth session on culture and values

Customers • Ongoing support for Retail, Commercial, • Impact of the pandemic on Retail,
Insurance and Wealth customers as part Commercial, Insurance and Wealth
of Helping Britain Recover customers
• Approach to dashboard measuring • Customer Fair Value principle
customer satisfaction (Group Customer • In-depth session on becoming the
Dashboard) for 2021 and Group best bank for business
Customer Dashboard targets for 2021

Strategy • Strategic Review 2021 – please read • Strategy day and sessions to discuss
more on pages 32 to 33 development of the Group’s new
• Acquisition of Embark – please read strategy and to revisit its purpose –
more on page 28 please read more on pages 2 to 25,
• Establishment of Citra Living – please 29 and 79
read more on page 28 • Review of the external environment in
a strategic context

Financial • Payment of final dividend for 2020 and • Regular finance reports
an interim dividend for 2021 – please • Financial forecasts
read more on page 29 • Capital and liquidity positions
• Annual Report, Form 20-F, half- • Structural hedging
year results and quarterly interim • Group Corporate Treasury
management statements management information report
• 2021 budget and operating plan,
funding and liquidity plans and
capital plan
• 2021 solvency stress test

Risk • Risk appetite • Consolidated risk reports

management • Risk appetite metrics • Reports from the Board Risk
• Risk management framework Committee
• Control effectiveness review • Climate Biennial Exploratory Scenario
(CBES) climate risk stress test

Regulatory • Whistleblowing policy • PRA Periodic Summary Letter

• Annual review of Group Ring-Fencing • Group’s progress towards resolvability
Policy and Compliance Annual under the Bank of England’s
Framework Resolvability Assessment Framework
• Group recovery plan and Resolvability
Assessment Framework Self-
Assessment for submission to the PRA

Governance • Board and Committee appointments • Future operation of the Board and its
• Board diversity policy Committees
• Outcomes of, and actions arising from, • Executive and Board succession
the 2020 Board effectiveness review planning in context of diversity,
• Deferral of the 2021 external Board retention and development
effectiveness review to 2022 • Approach to the Corporate
• Non-Executive Director independence Governance Framework
annual review
 Lloyds Banking Group Annual Report and Accounts 2021 79

Board oversight
How governance contributes to the delivery of our strategy

Our governance arrangements contribute The Board is responsible for overseeing The Board has also been heavily involved
to the development and delivery of our and developing the Group’s strategy with the development of the Group’s new
strategy in various ways, including by and monitoring its implementation by strategy and the diagram below gives an
seeking accountability and responsibility, the Group Chief Executive, supported by indication of the some of the key Board
information flow and independent insight the wider executive management team. discussion topics on the development
from the Non-Executive Directors. During 2021, the Board has regularly of the Group’s new strategy during the
reviewed the Group’s progress against its second half of 2021 and early 2022.
delivery of Strategic Review 2021.
Focus of Board discussion

• Role of purpose in our strategy • Strategic vision • Key enablers and execution
• Expressing our purpose • Key strategic choices and approach for strategy
• Purpose-alignment of our options for the retail and • Operating model and culture
current business commercial customer businesses • Financial shape of the baseline
• Initial priorities for enablers of economics and strategic choices
new strategy

• Colleague feedback on purpose • Finalising our purpose-driven • Approval of strategy, financial

work mission statement and financial plans, targets and investor
• Overall shape and direction of and delivery plan for the strategy communications
strategic choices and outcomes • Measurement and monitoring
• Proposed mission statement and approach for delivery of strategy

Governance
principles • External and internal stakeholder
communication strategy

Our focus on ESG The Group has made good progress in Our focus on technology
The Board has overall oversight of further incorporating climate change The Board recognises the importance
environmental, social and governance into the Group strategy and business of technology in how the Group
(ESG) matters. As ESG matters are an operations as well as prioritising the serves customers and changing how
integral part of the Group’s strategy, areas of our businesses where we see colleagues work. The Nomination and
the Board considered them during the the greatest opportunity to support Governance Committee therefore
development of the Group’s new strategy. and accelerate the transition to a low made the recruitment to the Board
carbon economy. We are enhancing our of additional technology expertise a
The Responsible Business Committee disclosures with our inaugural standalone priority, resulting in the appointment
oversees and monitors the Group’s Climate Report and have published key of Harmeen Mehta. Harmeen is Chief
strategy and plans for delivering the sector targets for high-emissions and Digital and Innovation Officer at BT and
Group’s aspirations to be a trusted, fossil fuel sectors, committing to a full brings to the Board 25 years’ experience
responsible business as part of our phase-out from thermal coal. Given this leading digital, engineering, IT and
purpose to Help Britain Prosper. progress and the evolving best practice innovation transformation as well as
During 2021, the Responsible Business for climate votes, we do not intend at incubating new businesses and creating
Committee discussed regular present to bring a climate vote to the new revenue streams in businesses.
updates on key environmental and 2022 AGM. We will continue to consider a
social issues, providing oversight vote on a year by year basis. The Group’s Information Technology
and challenge on those activities that and Cyber Advisory Forum (ITCAF)
impact our stakeholders. In addition, Read more on pages 34 to 36, in the was established in 2018 to enable a
the Responsible Business Committee Responsible Business Committee Report smaller group of Board members, as
reviewed quarterly progress against our on page 100 and in our Lloyds Banking well as directors of Lloyds Bank plc
Helping Britain Recover commitments. Group ESG Report 2021. and Bank of Scotland plc, to engage
in more detailed review of the Group’s
IT-related operational risks. This helps
inform and enhance discussions
Supporting colleagues Our workforce engagement of the Board and the Board Risk
Speak Up (the Group’s whistleblowing In 2021, the Responsible Business Committee, to which ITCAF reports.
programme) enables colleagues Committee became the designated During the course of the year ITCAF
to raise matters of concern. Alan body for the Board’s engagement with considered a wide range of technology-
Dickinson is the Group’s whistleblowing the workforce, creating a dedicated related matters, including the Group’s
champion and is responsible for resource of Non-Executive Directors, ongoing use of cloud technology, the
overseeing the integrity, independence while retaining a commitment for the continuing digitisation of the Group’s
and effectiveness of the Group’s whole Board to continue to engage business, matters of cyber security,
whistleblowing procedures. In addition, with colleagues. and the management of risk relating
the Audit Committee reviews reports to IT and cyber issues generally.
on whistleblowing to ensure there Please see page 27 for further examples
are arrangements in place which of how the Board engages with the
colleagues can use in confidence Group’s workforce and why the Board
to report relevant concerns and considers those arrangements to
reports on its review to the Board. be effective.
80 Lloyds Banking Group Annual Report and Accounts 2021

Board leadership and company purpose continued

Focusing on culture Board support in 2021

This year the Board continued actively
Monitoring progress
The Board has continued to monitor the
We are focused on creating a healthy to assess, oversee and monitor our progress the Group has made on culture
culture which is purpose-driven and culture through a number of updates and and colleague feeling. Updates included
values-led to help us deliver the right discussions. This included its support details of the Colleague pulse surveys,
outcomes for customers. to move the 2020 Culture Acceleration Financial Services Culture Board survey
Initiatives into ‘business as usual’ activity, and Colleague survey, with updates
Our six culture drivers provide a clear aligned to our culture drivers, as part of on critical activities and discussions on
focus for our culture activities and a the Group culture plan. Action in 2021 cultural challenges and tensions.
consistent structure for Group and built on 2020 with a focus on embedding
Divisional culture plans. Our drivers are: changes made and continuing to ‘raise In addition, culture progress is also
the bar’. measured through our Culture Index,
which brings together key metrics from
Key areas of focus the Colleague and Financial Services
• Building empathy into the way we Culture Board surveys. The full results
support customers, clients and from these surveys and a behavioural
colleagues diagnostic tool are also used to
• Continuing to embed Your Best 2 understand our culture.
and use this to help colleagues and
teams connect to our purpose
• Powering up Behavioural Experiments 4,
encouraging everyone to use this as
a tool to simplify how we work
• Simplifying our approach to risk,
encouraging all colleagues to have
a healthy risk mindset
• Build on the foundations laid for
adoption of hybrid ways of working, with
guidance and training for teams to have
conversations on their future ways
of working

2021 progress
While we have seen a drop across some
of our engagement metrics1 through How we think about our
our colleague surveys in 2021, we have culture and ways of working
seen some increases in areas where we is fundamental. It’s probably
have had a targeted cultural focus, such
as the two areas below.
more important than some
of the strategic choices
we make.
89%
(+2 versus 2020)
Charlie Nunn
Group Chief Executive
Where I work, people take responsibility
for solving customer problems

82%
(+7 versus 2020)
Looking to the future
Recognising that we are at an
We are strengthening the connection
between our culture, purpose
inflection point on our cultural and strategy with increased clarity
As a result of my Your Best2 Check-ins3, about what Helping Britain Prosper
I’m clear on how I’m performing journey, driven by evolving ways
of working, changes in senior means and new values which clarify
leadership and strategic changes the expectations we have of each
in the Group, we are taking the other. Through effective embedding
1 Read more on our employee engagement index
on page 31. opportunity to reset our culture. of these new values in 2022 and
2 Your Best is our straightforward, simplified, beyond, we can continue to build
collaborative approach to performance The Board has been actively on the progress already made in
management.
engaged in understanding our creating a truly purpose-driven and
3 Check-ins are honest, two-way conversations
culture, joining colleague focus values-led culture.
between a colleague and their manager to share
feedback on objectives, development goals and groups to understand the current
growth in skills. strengths and challenges. The Board
4 Behavioural Experiments is teams and has also discussed the themes which
individuals intentionally using our Group
impact our current culture and our
Behaviours to tackle everyday challenges
through a series of small experiments.
future cultural aspirations.
 Lloyds Banking Group Annual Report and Accounts 2021 81

Group structure and Group structure • Equity sub-group under LBG Equity
The subsidiaries of the Group are Investments Limited, for which
ring-fencing governance structured into the following sub- the principal subsidiary is Lloyds
arrangements groups under Lloyds Banking Group plc, Development Capital Limited
Since 1 January 2019 UK legislation has providing effective governance for the
required large UK banks to separate business undertaken in each sub-group: The boards of the Ring-Fenced Banks
personal banking services, such as • Ring-Fenced Banks sub-group comprise all of the Group Directors plus
current and savings accounts, from riskier containing Lloyds Bank plc and Bank of three additional independent Non-
activities, such as investment banking, Scotland plc (including the Halifax and Executive Directors: Nigel Hinshelwood
in other parts of their business. This is MBNA businesses), serving both their (Senior Independent Director), Sarah
called ring-fencing. The Group’s structure UK personal and commercial customers Bentley and Brendan Gilligan. These
and governance arrangements meet • Non-Ring-Fenced Bank sub-group Ring-Fenced Bank-only Directors are
these regulatory requirements. Lloyds – Lloyds Bank Corporate Markets plc – independent of the management and
Bank plc and Bank of Scotland plc are the which provides products and services to the rest of the Group and their role is to
banks, within the Group, which have been Group customers that are not allowed act exclusively in the best interests of the
included within the ring-fence (together, within the ring-fence, as well as serving Ring-Fenced Banks. They play a crucial
the Ring-Fenced Banks). The governance financial institutions customers and role in the governance structure, with an
structure focuses on ensuring: holding certain of the Group’s subsidiaries enhanced role in managing any potential
• Independent decision-making by and branches outside the UK conflicts between the Ring-Fenced Banks
the Ring-Fenced Banks’ boards – on • Insurance sub-group under Scottish and the Group.
any matters where there might be a Widows Group Limited (including
conflict between the interests of the Scottish Widows Limited)
Ring-Fenced Banks and the interests of
another part of the Group
Lloyds Banking Group plc
• Risks affecting the Ring-Fenced Banks
are considered and managed from
the Ring-Fenced Banks’ perspective –

Governance
including maintenance of the capital
adequacy and liquidity of the Ring-
Fenced Banks Aligned boards
• Clear and effective governance at both
Ring-Fenced Bank and Lloyds Banking Lloyds Bank plc1
Group plc level – including second and Lloyds Bank Scottish LBG Equity
third lines of defence in respect of risk Corporate Widows Group Investments
HBOS plc
management Markets plc Limited Limited
Bank of Scotland plc1
1 Ring-Fenced Banks Non-Ring- Insurance Equity
Fenced Bank Investments

Ring-Fenced Bank-only Directors

Nigel Hinshelwood Sarah Bentley Brendan Gilligan

Senior Independent Independent Non- Independent Non-
Director Executive Director Executive Director
Lloyds Bank plc and Lloyds Bank plc and Lloyds Bank plc and
Bank of Scotland plc Bank of Scotland plc Bank of Scotland plc

Appointed: January 2019 Appointed: January 2019 Appointed: January 2019

Skills, experience and contribution: Skills, experience and contribution: Skills, experience and contribution:
Extensive experience in the financial Extensive digital and digital transformation Extensive experience in core strategic
services sector having worked across the experience finance and controllership roles in the
UK and Europe, North and South America, Strong customer and marketing skills financial services industry
the Middle East and Asia Pacific Sarah is Chief Executive Officer and Executive Significant experience of serving on the
Significant experience of large scale Director of Thames Water Utilities Limited and boards of regulated financial services
transformation, operations a Director of Water UK, the trade association businesses in the UK, France, Switzerland
and technology of the water and wastewater industry. Prior to and Poland
Nigel was a partner at Ernst & Young joining Thames Water in autumn 2020, Sarah Brendan’s career began in the Public Audit
(subsequently Cap Gemini Ernst & Young) was Chief Customer Officer at Severn Trent plc division of KPMG in Ireland and Canada. He
for many years where he held numerous and a member of its Executive Committee. subsequently worked in commercial and
positions including Head of Financial Services Before joining Severn Trent, Sarah was the consumer banking services and financing
and Chief Executive Officer of Southeast Asia. Managing Partner for Accenture’s Digital with Woodchester Investments plc and, after
Before becoming a Non-Executive, he was business unit in the UK and Ireland. Sarah its acquisition by General Electric Company,
the Head of HSBC UK and Deputy CEO of previously worked internationally in a number with GE Capital until his retirement in
HSBC Bank plc. Within the HSBC Group he of roles including Strategy, Marketing & April 2018.
held a number of executive appointments Propositions for BT’s Global Services division,
including Head of HSBC Insurance Holdings, CEO of Datapoint, and Senior Vice President
Chief Operating Officer for Europe, of eLoyalty.
Middle East and Africa, and Global Head
of Operations. Nigel was formerly a Non-
Executive Director of Lloyd’s of London
Franchise Board.
82 Lloyds Banking Group Annual Report and Accounts 2021

Division of responsibilities
Board responsibilities Non-Executive Directors Executive Directors
As Chair, Robin Budenberg has overall
responsibility for the leadership of the
Board and for ensuring its effectiveness
in all aspects of its operation. These
responsibilities are formalised within the
Corporate Governance Framework.

The composition of the Board (currently,

the Chair, seven Non-Executive Directors
and the two Executive Directors) helps
ensure that no one individual or small Chair Group Chief Executive
group of individuals dominates the Robin Budenberg Charlie Nunn
Board’s decision-making. The diversity Robin Budenberg leads the Board and Charlie Nunn manages and leads the Group
of skills, experience and background on promotes high standards of corporate on a day-to-day basis, making decisions
the Board enables the Board to provide governance. He leads in building an effective on matters affecting the operation and
constructive challenge and strategic and complementary Board and sets the performance of the Group’s business and the
guidance and to offer specialist advice. Board’s agenda. The Chair also leads Board delivery of the Board’s approved strategy.
succession planning and seeks to ensure He delegates aspects of his authority, as
effective communication with shareholders. permitted under the Corporate Governance
There is a clear division of responsibilities Framework, to other members of the Group
between the leadership of the Board and Executive Committee.
the executive leadership of the Group
– please refer to the role summaries
on the right. The responsibilities of the
Chair, Group Chief Executive, Senior
Independent Director, Board and
Committees are agreed by the Board
and publicly available on the Group’s
website at www.lloydsbankinggroup.com/
who-we-are/group-overview/corporate-
governance. The Chair periodically Deputy Chair and Senior Independent Chief Financial Officer
refreshes Committee membership. Director William Chalmers
Alan Dickinson Under the leadership of the Group Chief
Monitoring independence As Deputy Chair, Alan Dickinson supports the
Chair in representing the Board, and acts as
Executive, William Chalmers makes and
implements decisions in all matters affecting
The Nomination and Governance a spokesperson for the Group. He deputises the management of financial resources. He
Committee monitors whether there are any for the Chair and is available to the Board for provides specialist knowledge and experience
relationships or circumstances which may consultation and advice. The Deputy Chair to the Board. Together with Charlie Nunn,
affect a Director’s independence. Following may also represent the Group’s interests to William Chalmers designs, develops and seeks
the most recent review of independence, official enquiries and review bodies. to implement strategic plans and deals with
As Senior Independent Director, Alan day-to-day operations of the Group.
the Committee concluded that all Non-
Executive Directors are independent in Dickinson is a sounding board for the Chair
and Group Chief Executive. He acts as a
character and judgement. Robin Budenberg conduit for the views of other Non-Executive
was independent on appointment when Company Secretary
Directors and conducts the Chair’s annual
assessed against the circumstances set out performance appraisal. He is available to
in provision 10 of the Code. help resolve shareholders’ concerns and
attends meetings with major shareholders and
financial analysts to understand issues and
Monitoring time commitments concerns.
Non-Executive Directors are advised
of time commitments prior to their
appointment and are required to devote
such time as is necessary to discharge their
duties effectively. The time commitments
of the Directors are considered by the Non-Executive Group Company Secretary
Board on appointment and annually Directors Kate Cheetham
thereafter, and, following the most recent The Independent Non-Executive Directors As Group Company Secretary, Kate Cheetham
review, the Board is satisfied there are no challenge management constructively advises the Board on matters relating to
Directors whose time commitments are and help develop and set the Group’s governance, ensuring good information
strategy. They actively participate in Board flows and comprehensive practical support
considered to be a matter for concern. decision-making and scrutinise management is provided to Directors. Kate Cheetham is
performance. The Non-Executive Directors also responsible for maintaining the Group’s
External appointments, which may affect satisfy themselves on the integrity of financial Corporate Governance Framework and
existing time commitments relevant information and review the Group’s risk organising Directors’ induction and training.
to the Board, must be agreed with the exposures and controls. The Non-Executive Both the appointment and removal of the
Directors, through the Remuneration Group Company Secretary is a matter for the
Chair, and prior Board approval must Committee, also determine the remuneration Board as a whole.
be obtained before taking on any new of Executive Directors.
external appointments. The Board did not
approve any significant additional external
appointments in 2021. No Executive
Director has taken up more than one
The right information and support
The Chair, supported by the Group Company Secretary, ensures that Board members
Non-Executive Director role at a FTSE 100
receive appropriate and timely information. All Directors have access to the advice of the
company or taken up the chair of such a
Group Company Secretary and the Group provides access, at its expense, to the services
company. More information on Directors’
of independent professional advisers in order to assist Directors in their role. Board
attendance at meetings can be found
Committees are also provided with sufficient resources to discharge their duties.
on page 77.
 Lloyds Banking Group Annual Report and Accounts 2021 83

Composition, succession and evaluation

Composition More details about the process for the
Our Board in 20213
The balance of skills, experience, appointment of Harmeen Mehta as a
independence and knowledge on Non-Executive Director can be found on
page 88. Gender diversity
the Board is the responsibility of the
Nomination and Governance Committee
and is reviewed annually or whenever Succession planning Male 6
appointments are considered. The The Nomination and Governance Female 4
Nomination and Governance Committee Committee ensures plans are in place
assesses the skills, experience and for orderly succession to both Board
knowledge of the Non-Executive Directors and senior management positions, and
on an individual basis and on a collective oversees the development of a diverse
basis – please see the table below for the pipeline for succession. More information
results of the latest assessment, which was about the work of the Nomination and
approved on 24 November 2021. Having Governance Committee on succession
the right balance of skills and experience planning can be found on pages 87
helps to ensure Directors discharge their and 89. Age
duties effectively.
At the 2022 AGM all Directors intend to 44–55 4
The Nomination and Governance seek re-election or election except for 56–65 3
Committee leads the process for Stuart Sinclair, who intends to step down 66–75 3
Board appointments, which makes at the 2022 AGM. The Board believes that
recommendations to the Board. Open all Directors continue to be effective and
advertising and/or an external search committed to their roles.
consultancy is used for the appointment
of the Chair and Non-Executive Directors.
Appointments are made on merit and due
Evaluation
During 2021, actions identified in the 2020
consideration is given to diversity in its

Governance
Board evaluation were implemented.
broadest sense, including gender, social
More information on those actions and on Ethnic diversity
and ethnic backgrounds, and cognitive
our next Board evaluation can be found
and personal strengths.
on page 85.
White 8 (80%)
Black, Asian
Collective view of the skills, experience and knowledge of Non-Executive Directors 1
or minority
ethnic 2 (20%)

Retail/Commercial Banking Major Change Programmes

Financial Markets/ Wholesale Banking/ ESG: Environment, Sustainability

Treasury and Climate Change
3 All data as at 31 December 2021. Gender and
Insurance ESG: Social, Inclusion and Diversity, ethnicity data remains correct as at the date of
and Governance publication of the Annual Report.

Audit and Finance Listed Board Governance, including

Investor Relations and Remuneration

Risk – in Financial Institutions Government/

Regulator Interface

Technology/Digital Strategic Thinking

Consumer/Marketing/Distribution Good experience and knowledge

Deep experience – distinctive strength

1 Nomination and Governance Committee assessment as at 24 November 2021.

Tenure of Non-Executive Directors2

2014 2015 2016 2017 2018 2019 2020 2021

Robin Budenberg 1

Alan Dickinson 7

Sarah Legg 2

Lord Lupton 4

Amanda Mackenzie 3

Harmeen Mehta 0

Stuart Sinclair 5

Catherine Woods 1

Length of current tenure in complete years

2 Non-Executive Directors in office at the date of this Annual Report and Accounts.
84 Lloyds Banking Group Annual Report and Accounts 2021

Composition, succession and evaluation continued

Board training Meetings are scheduled with Board Other training

The Chair is responsible for leading the Directors, the Group Company Secretary, Direct training sessions have been offered
development of, and monitoring the GEC members, and other senior across a range of topics of particular
effective implementation of, training managers to discuss aspects such as: interest that were chosen to complement
policies and procedures for the Directors. • The UK banking regulatory framework the Board agenda and facilitate advanced
On appointment, each Director receives a and corporate governance including discussion. Where training was offered
formal and tailored induction. In addition, ring-fencing requirements, the Senior online, the sessions have been recorded
there is a programme of ongoing training Managers and Certification Regime, and made available to all Directors. The
for Directors. culture and conduct expectations and topics are produced based on the level
whistleblowing of knowledge and experience of Board
The Directors are committed to their own • Strategic challenges facing the Group members. Topics during 2021 included:
ongoing professional development and • Culture and values • Financial models
the Chair discusses training with each • Group operations • Data
Non-Executive Director at least annually. • Risk management • Group technology strategy
The Company Secretary oversees a • Financials (including meetings with • Technology foundations
training plan for the Non-Executive internal and external auditors) • Cloud infrastructure
Directors, with the plan for 2021 discussed • Capital management and liquidity • Emerging cyber trends
at the Nomination and Governance • Inclusion and diversity • Payments
Committee at the start of the year with the • Retail Banking and Wealth Management • Sustainability and climate risk
Non-Executive Directors encouraged to • Commercial Banking • Resolution
suggest training topics of interest. • Scottish Widows Group Limited and the
Insurance sub-group In addition to the above, a board incident
Induction • Lloyds Bank Corporate Markets plc and management exercise was undertaken.
New Non-Executive Directors like the Non-Ring-Fenced Banks sub-group
Harmeen Mehta receive a tailored • LBG Equity Investments and the Equity Committee-specific training is agreed
induction that focuses on the Group’s sub-group by Committee Chairs and Committee
culture and values, stakeholders, strategy, secretaries as and when needed.
structure, operations and governance. Group training modules
The emphasis is on ensuring the induction Non-Executive Directors are asked to Directors who take on new roles or change
brings the business and its issues alive, complete training modules on a quarterly roles during the year attend induction or
taking account of the specific role the basis. In 2021, these modules were on: handover meetings in respect of those
Director has been appointed to fulfil and • Information risk and cyber security new roles.
their skills and experience to date. • Anti-bribery: fighting fraud and
financial crime
An induction pack is provided containing • Conduct Rules
key corporate documents and information • Competition law
relating to the Group covering aspects • Data privacy and records management
such as the role of a director (including • Speak Up (the Group’s
relevant Group policies such as anti- whistleblowing programme)
bribery, conflicts of interest, expenses,
gifts and hospitality and share dealing), the
Board and its Committees, financials and
strategy, governance, risk management,
culture, shareholders and training.

Closer to Customers, Colleagues and Clients programme

Customers Colleagues
These modules aim to develop further the These modules provide the opportunity
understanding of customers’ lives to meet with colleagues to discuss the
and how the Group can support them via Group’s culture, colleagues’ roles and
customer focus groups, and a choice of their experience of supporting customers
call recordings, in each case on and clients. Time is spent in focus groups
a range of topics. on topics such as colleagues’ views on
the Group’s culture and purpose and
on colleagues’ experiences supporting
Clients customers and businesses.
These modules aim to deepen
The Group has developed a bespoke experience and understanding of the
training programme for Non-Executive Group’s Commercial Banking base via
Directors, which aims to bring Non- intimate roundtable events and client
Executive Directors closer to our meetings as well as virtual sessions
customers, clients and colleagues. The and client research recordings.
programme includes a range of live and
recorded engagement options and has
been very well received by the Non-
Executive Directors.
 Lloyds Banking Group Annual Report and Accounts 2021 85

Board evaluation Given the appointment of a new Group the views of the Executive Directors. The
The annual evaluation, which is typically Chief Executive in August 2021 and the evaluation found the Chair’s performance
facilitated externally at least once every Group’s ongoing strategy development, to be effective.
three years, provides an opportunity the Board agreed that an evaluation of
to consider ways of identifying greater its effectiveness together with that of its If Directors have concerns about the
efficiencies, maximising strengths and Committees, will be conducted in 2022 Company or a proposed action which
highlighting areas of further development instead of in 2021 in order to allow the cannot be resolved, their concerns are
to enable the Board continuously to review to cover the Board’s effectiveness recorded in the Board minutes. Also, on
improve its own performance and the in overseeing these developments. resignation, Non-Executive Directors
performance of the Group. External board review specialist Dr Tracy are encouraged to provide a written
Long of Boardroom Review Limited has statement of any concerns to the Chair, for
The Chair of the Board, with the support been engaged to conduct that evaluation, circulation to the Board. No such concerns
of the Nomination and Governance with the results to be presented to the were raised in 2021 and up to the date of
Committee, leads the Board in Board during 2022. Dr Tracy Long is an this report.
considering and responding to the annual independent external service provider
review of the Board’s effectiveness, which with no connection to the Group or any Progress against the
includes a review of its Committees individual Directors. Details of the process
and individual Directors. Performance followed, findings and actions arising from 2020 evaluation
that external evaluation will be included in The main focus in improvements to
evaluation of the Chair is carried out by
the Annual Report and Accounts 2022. Board effectiveness in 2021 has been on
the Non-Executive Directors, led by the
creating room for more forward-looking
Senior Independent Director, considering
Given the Board’s decision to defer the and strategic discussions on key matters
the views of the Executive Directors.
annual evaluation of its effectiveness at Board and Committee meetings. These
until 2022, the Chair undertook individual enhancements have been achieved by
The Board is committed to independent
assessments of the Non-Executive (1) enhancing focus by the Board and
evaluation of its own effectiveness and
Directors in January 2022 and found individual Directors on their primary role
that of its Committees as recommended
that the Non-Executive Directors are of establishing, and providing oversight
by the UK Corporate Governance

Governance
committed and continue to operate of, the Group’s purpose, values and
Code 2018. An external evaluation was
effectively individually and collectively as strategy; and (2) enhancing the clarity of
last conducted in 2018, with internal
a board. In January 2022, a performance accountability between the Boards and the
evaluations having been carried out in
evaluation of the Chair was undertaken by Group Chief Executive Committees. Further
2019 and 2020.
the Non-Executive Directors, led by the improvements have been made in relation
Senior Independent Director, considering to the quality of Board papers and training
for members of the Board and Committees.

Theme Feedback from the 2020 Evaluation Actions taken in 2021

• Call for further strategic, • Board and Committee agendas rationalised to focus more on core
Board forward-looking discussion activities and matters reserved for the Board
discussion • Enhanced the process for appropriate delegation to Committees,
and debate including where possible, delegation to Committees for appropriate
decisions or final decisions where the Board has extensively discussed
and agreed the item in principle

• Improve quality of Board • Streamlined the Board agenda papers

Board papers papers • Established new form of reports from the Group Chief Executive,
Chief Financial Officer and Chief Risk Officer for Board meetings, to be
narrative led, drawing out key insights and expressing views on key issues
• New board portal implemented to give enhanced functionality for Board
members, including the ability to ask clarification questions directly to
report writers and Board members
• Board paper authors trained to ensure the ‘ask’ in papers is clear and
to improve the quality of papers
• Feedback sought from Directors on improvements to the quality of papers

• Further formal technical • Training has been rolled out to Directors in relation to a range of subject
Training training for members of matter including financial models, data, Group technology strategy,
Boards and Committees technology foundations, cloud infrastructure, emerging cyber trends,
payments, sustainability and climate risk, and resolution and a bespoke
programme on customers, clients and colleagues – please see page 84
for more information about the ‘Closer to Customers, Colleagues and
Clients programme’ and the training provided to Directors
• Additional training scheduled for individual Directors as needs
are identified
86 Lloyds Banking Group Annual Report and Accounts 2021

Audit, risk and internal control

Audit and risk Internal control Control effectiveness review
There are formal policies and procedures Board responsibility All material controls are recorded and
in place designed to ensure the The Board is responsible for the Group’s assessed on a regular basis in response
independence and effectiveness of the risk management and internal control to triggers or at least annually. Control
internal and external audit functions. systems, which are designed to facilitate assessments consider both the adequacy
Group Internal Audit is a single effective and efficient operations and of the design and operating effectiveness.
independent internal audit function, to ensure the quality and integrity of Where a control is not effective, the root
reporting to the Audit Committee. Further internal and external reporting and cause is established and action plans
detail can be found in the sections headed compliance with applicable laws and implemented to improve control design
‘Group Internal Audit’ and ‘Auditor regulations, and for the determination or performance. Control Effectiveness
independence and remuneration’ on of the nature and extent of the principal against all residual risks are aggregated
page 93. risks the Group is willing to take in order by risk category, reported and monitored
to achieve its strategy. The Directors and via the monthly Consolidated Risk
The Board has delegated a number of senior management are committed to Report (CRR). The CRR is reviewed and
responsibilities to the Audit Committee, maintaining a robust control framework independently challenged by the Risk
including monitoring and reviewing as the foundation for the delivery of Division and provided to the Risk Division
financial reporting, the effectiveness of effective risk management. The Directors Executive Committee and Group Risk
internal controls and the risk management acknowledge their responsibilities in Committee. On an annual basis, a point
framework, whistleblowing, the internal relation to the Group’s risk management in time assessment is made for control
audit process and the external auditor’s and internal control systems and for effectiveness against each risk category
process. The Audit Committee reports reviewing their effectiveness. and across the sub-groups. The CRR data
regularly to the Board on its activities, and is the primary source used for this point
its report for 2021, confirming how it has In establishing and reviewing the risk in time assessment and a year on year
discharged its duties, can be found on management and internal control comparison on control effectiveness is
pages 90 to 93. systems, the Directors carried out a robust reported to the Board.
assessment of the emerging and principal
Requirements that the Annual Report is risks facing the Company, including Reviews by the Board
fair, balanced and understandable are those that would threaten its business The effectiveness of the risk management
considered throughout the drafting and model, future performance, solvency or and internal control systems is reviewed
reviewing process and the Board has liquidity and reputation, the likelihood regularly by the Board and the Audit
concluded that the 2021 Annual Report of a risk event occurring and the costs of Committee, which also receive reports of
meets this requirement. The Board is control. The process for identification, reviews undertaken by the Risk Division
supported in this by its Audit Committee evaluation and management of the and Group Internal Audit. The Audit
and a sign-off process involving emerging and principal risks faced by Committee receives reports from the
different sections of the Annual Report the Group is integrated into the Group’s Company’s auditor, Deloitte LLP (which
being approved for inclusion by senior overall framework for risk governance. include details of significant internal
management, with additional review by The risk identification, evaluation and control matters that they have identified),
the Group Disclosure Committee. The management process also identifies and has a discussion with the auditor
statement of Directors’ responsibilities can whether the controls in place result in an at least once a year without executives
be found on page 133 and the statement acceptable level of risk. At Group level, a present, to ensure that there are no
of the Auditor’s responsibilities for the consolidated risk report and risk appetite unresolved issues of concern.
audit of the financial statements can be dashboard are reviewed and regularly
found on page 204. Related information debated by the Group Risk Committee, The Group’s risk management and internal
on the Company’s business model and Board Risk Committee and the Board control systems are regularly reviewed
strategy can be found on pages 1 to 44. to ensure that they are satisfied with the by the Board and are consistent with
overall risk profile, risk accountabilities the Guidance on Risk Management,
The Board is responsible for the Group’s and mitigating actions. The report and Internal Control and Related Financial and
risk management and internal controls dashboard provide a monthly view of Business Reporting issued by the Financial
systems, including the determination the Group’s overall risk profile, key risks Reporting Council and compliant with the
of the nature and extent of risk the and management actions, together with requirements of CRD IV. They have been
Company is willing to take. Risk is further performance against risk appetite and an in place for the year under review and up
managed through the Board-approved assessment of emerging risks which could to the date of the approval of the Annual
risk management framework, as discussed affect the Group’s performance over the Report. The Group, Ring-Fenced Bank
in the risk management report on pages life of the operating plan. Information sub-group and Lloyds Bank Corporate
134 to 193. The Board Risk Committee regarding the main features of the internal Markets plc have achieved full compliance
assists the Board in fulfilling its risk control and risk management systems with BCBS 239 risk data aggregation and
governance and oversight responsibilities, in relation to the financial reporting risk reporting requirements, and continue
including by the provision of advice to process is provided within the risk to actively maintain this status.
the Board on risk strategy and overseeing management report on pages 134 to 193.
the development, implementation and The Board concluded that the Group’s
maintenance of the Group’s overall risk risk management arrangements are
management framework and its risk adequate to provide assurance that the
appetite. The Board Risk Committee risk management systems put in place are
reports regularly to the Board on suitable with regard to the Group’s profile
its activities, and its report for 2021, and strategy.
confirming how it has discharged its
duties, can be found on pages 94 to 99.
 Lloyds Banking Group Annual Report and Accounts 2021 87

Nomination and Governance Committee report

A strong and effective Board Consideration has been given to planned

Board retirements and the impact of
these on membership of the Board
is central to helping deliver and its Committees. The Committee’s
ongoing review of the structure, size
the Group’s strategy and composition of the Board and
its Committees helps ensure that the
appropriate mix of knowledge, skills,
experience and diversity is maintained. A
number of other changes, beyond those
Key activities in 2021 set out below, have also been made to the
Robin Budenberg
membership of Board Committees during
Chair, Nomination and • Board and Committee composition, the year, as detailed in the summary of
Governance Committee skills and training
Board and Committee composition and
• Board and senior executive succession attendance on page 77. The most notable
planning
of these was the streamlining of the Board
• Implementation of 2020 Board Risk Committee membership.
evaluation recommendations
• Diversity and inclusion As indicated in last year’s report, Sara
Weller retired as planned from the Board,
Introduction and as Chair of the Responsible Business
As highlighted in my introduction to the Committee, at the AGM in May 2021,
Delivery of the Group’s governance report on page 70, following with Amanda Mackenzie succeeding
the appointment of Charlie Nunn as Group her as Chair of the Responsible
strategy will only be Chief Executive, the year has seen a focus Business Committee. As announced
achieved with the right mix on development of the Group’s purpose on 23 September 2021, Nick Prettejohn
of knowledge, skills and and strategy. This focus has also shaped stood down as a Non-Executive Director,

Governance
the agenda and focus of the Committee’s effective from 30 September 2021 and
experience across the Board activities during the year, most notably Stuart Sinclair notified the Board of his
and the executive matched the Committee’s consideration of Board intention to retire from the Board at
with its diversity. and executive level succession planning the AGM in 2022. Stuart stood down as
and discussions, which led to the Board’s Chair of the Remuneration Committee
decision to defer the Board evaluation, as with effect from 24 November 2021,
discussed below. with Alan Dickinson succeeding him in
Q&A the role, having been a member of the
Committee purpose and Remuneration Committee since July 2015.
How has the Nomination and Governance responsibilities Alan also continues in his role as Deputy
Committee (the Committee) reflected the The purpose of the Committee is to keep Chair and Senior Independent Director.
Group’s strategic direction in its consideration the Board’s governance, composition,
of Board and Committee membership? skills, experience, knowledge, Last year’s report discussed Charlie
independence and succession Nunn’s appointment as Group Chief
A The Committee fully recognises the
arrangements under review and to Executive. William Chalmers, Chief
need for and benefits that a diverse Board make appropriate recommendations Financial Officer, took on the role of acting
provides. The experience and knowledge to the Board to ensure the Company’s Group Chief Executive when Sir António
that Harmeen Mehta’s appointment brings arrangements are consistent with the Horta-Osório stepped down on 30 April
to the Board helps illustrate the Committee’s highest corporate governance standards. 2021, until Charlie’s appointment became
focus on not only the necessary collective effective on 16 August 2021.
skills and experience of the Board, but also
future strategic needs. The streamlining of
Succession planning On 16 June 2021 we announced Harmeen
As mentioned in my introduction to the
the Board Risk Committee membership this Mehta’s appointment as an independent
governance report on page 70, there
year also demonstrates the need for more Non-Executive Director, effective from
have been a number of changes to the
focused discussion. 1 November 2021. Harmeen also joined
Board and its Committees during the year;
the Group’s Information Technology
all of these have been overseen by the
How does the Committee consider broader and Cyber Advisory Forum (ITCAF),
Committee. Strong succession planning
succession planning? and both the Board and the ITCAF will
remains a key focus in helping ensure
benefit greatly from her impressive depth
the continuation of an appropriate mix
A The Committee also maintains a strong of experience and knowledge. Further
of skills, experience and backgrounds.
focus on succession planning at an executive details of the selection process for
Further details on the Committee’s
level, again recognising the need to ensure appointments can be found on page 88.
approach to succession planning can be
that an appropriate mix of knowledge, skills,
found on page 89.
experience and diversity is maintained. See In addition to a focus on succession
page 89 for more details of our approach. planning at Board level, the Committee
also has a strong focus on succession
What are the key areas of focus for the planning at an executive level. The
Committee in 2022? Committee continues to consider the
overall health of the executive talent
A Core areas of focus for 2022 will continue pipeline, together with detailed executive
to include succession planning at both Board succession planning. Key considerations
and executive level, managing Board (and include, for example, cultural and strategic
Committee) composition and skills, and capabilities which will help ensure the
driving diversity and inclusion at Board level continued transformation of the Group
and beyond. Board effectiveness will also be and the delivery of its strategic aims.
an area of particular focus, with scheduling of
the externally facilitated Board evaluation.
88 Lloyds Banking Group Annual Report and Accounts 2021

Nomination and Governance Committee report continued

Board effectiveness and In recommending Directors for election UK Corporate Governance

and re-election at the AGM, the
training Committee has reviewed the performance
Code
As referred to in my introduction to the The Company applied the UK Corporate
of each Non-Executive Director and
governance report on page 70, the Governance Code 2018 for the year
their ability to continue meeting the
Board has agreed that the next Board ending 31 December 2021 and complied
time commitments required, taking into
evaluation, which will be externally with all the provisions with two exceptions.
consideration individual capabilities,
facilitated, should be deferred to 2022. A detailed summary setting out the
skills and experiences and any potential
Given the appointment of a new Group Company’s compliance, together with
conflicts of interest that have been
Chief Executive and the Group’s ongoing details of these exceptions, can be found
disclosed. The external roles held by
strategic development, the Board agreed on page 71.
all Directors were considered to be
that such a deferral would allow the
appropriate. Fuller details of any conflicts
review to cover the Board’s effectiveness The Committee reports to the Board on
of interest can be found on page 131.
in overseeing management transition how it discharges its responsibilities and
and strategy review. The Committee also makes recommendations to the Board, all
considered the remaining actions taken in The Group’s Corporate of which have been accepted during the
response to feedback from the previous Governance Framework year. The Committee’s terms of reference
internal review undertaken in 2020. The annual review of the Corporate can be found at www.lloydsbankinggroup.
Further improvements have also been Governance Framework was undertaken com/who-we-are/group-overview/
made in relation to the quality of Board during the year and is expected to be corporate-governance.
papers and training for members of the finalised during the first half of 2022.
Board and Committees. Full details are The review focused on streamlining, Committee composition, skills
provided on page 85. simplifying and making the framework and experience
more accessible, while continuing to To ensure a broad representation of
The Committee also oversees training ensure full compliance with the relevant experienced and independent Directors,
undertaken by the Non-Executive obligations and best practice. There were membership of the Committee currently
Directors. The Chair discusses training no material changes to the framework comprises the Chair, Deputy Chair (who
with each Non-Executive Director at least during the year. is also the Senior Independent Director),
annually and, as set out in the summary
the Chair of the Responsible Business
of Board training on page 84, training As part of its broader governance Committee, together with a further
sessions have been offered across a range responsibilities, the Committee independent Non-Executive Director. The
of topics of particular interest, in addition considered regular updates on Senior Independent Director of the Ring-
to mandatory training requirements. developments in corporate governance, Fenced Banks also attends meetings as an
Learning and engagement opportunities including the FCA consultation on observer in order to provide insights on
have been undertaken by all Non- diversity and inclusion on company matters relevant to the Ring-Fenced Banks
Executive Directors in relation to material boards and executive committees and when required and as part of his role in
aspects of the Group’s business. the BEIS consultation on restoring trust the Group’s overall governance structure.
in audit and corporate governance, and
Independence and time also considered correspondence with The Group Chief Executive attends
commitments shareholders. meetings as appropriate. Details of
Based on its assessment for 2021, the Committee membership and meeting
Committee is satisfied that, throughout attendance during the year can be found
the year, all Non-Executive Directors on page 77.
remained independent1 in character
and judgement.

Appointment process – Harmeen Mehta, Independent Non-Executive Director

In late 2020, anticipating Sara Weller’s a diverse list of potential candidates with relevant knowledge, skills and experience.
intention to retire from the Board following the required knowledge, skills and The Committee’s recommendation for
the AGM held in May 2021, the Board experience. The Chair kept the Board and Harmeen’s appointment was subsequently
initiated a search process led jointly by the the Committee regularly informed on approved by the Board.
Chair and, until his retirement, the former progress, with discussions being held
Chair, to identify an additional independent throughout. A long list of candidates was Throughout what was a formal, rigorous
Non-Executive Director. A specific considered and narrowed down to a and transparent appointment process,
requirement was for the candidate to have diverse shortlist. Further detailed consideration was given to a broad range of
digital and technology skills, in addition to consideration led to the final shortlist of factors such as merit and objective criteria,
continuing to strengthen the Board’s overall four candidates each being interviewed by consideration of diversity of gender, social
diversity. Following a competitive tender the Chair, the Senior Independent Director and ethnic backgrounds, cognitive and
process, Heidrick & Struggles, who have and two of the Ring-Fenced Bank Directors, personal strengths, and the Group’s future
publicly stated commitments around the with each being assessed formally against strategic direction. Heidrick & Struggles has
provision of diverse board candidates defined competencies. Harmeen Mehta no further connection with the Group or
amongst the initial list of prospects, were was identified as the preferred candidate, individual Directors beyond undertaking
appointed to assist the Board in identifying recognising her depth and breadth of search and recruitment related activity.

1 The Chair was independent on appointment. Under the Code, thereafter the test of independence is not appropriate in relation to the Chair.
 Lloyds Banking Group Annual Report and Accounts 2021 89

Succession planning

Arrangements put in place to cover the The appointment process set out on the The Committee continued to focus on the
interim period prior to Charlie Nunn joining previous page helps illustrate how this adequacy of succession arrangements for
the Group illustrate how effective works in practice. key senior management roles. During the
succession planning can be used to year, consideration was given to the overall
address short-term requirements. Effective The Chair leads an ongoing assessment of strengthening of succession plans, and
succession planning also contributes to the the collective Board’s technical and ensuring an appropriate focus on
ability of the Group to deliver on its governance skill set. From this, the Chair continuing to improve diversity, in addition
strategic objectives over the medium and creates a Board skills matrix which is used to to the need to recognise the potential
longer term by ensuring the desired mix of track the Board’s strengths and identify any opportunities that development of the
skills and experience of Board members gaps in the desired collective skills profile of Group’s strategy may provide. This was also
now and in the future, of particular the Board. Various factors are taken into discussed at a full Board meeting during
relevance in the context of the Group’s consideration such as the Group’s future the year.
strategic development. The Board is also strategic direction, and helping ensure due
committed to recognising and nurturing weight is given to diversity in its broadest The Chair is responsible for developing and
talent within the executive and sense. The skills matrix is considered in the maintaining a succession plan for the Group
management levels across the Group to appointment of all Board members. The Chief Executive who is, in turn, primarily
ensure that the Group creates opportunities Group’s diversity commitments and responsible for developing and maintaining
to develop current and future leaders. outcomes of the Board evaluation process succession plans for key leadership
are also taken into consideration. positions in the senior executive team.
The Committee supports the Chair in
keeping the composition of the Board and The role of succession planning in
its Committees under regular review and in promoting diversity is fully recognised.
leading the appointment process for The Group has a range of policies which
nominations to the Board. This helps ensure promote the engagement of under-

Governance
continued focus on increasing the overall represented groups within the business in
diversity of the Board, and capacity for order to build a diverse talent pipeline.
future succession planning. Further details can be found on page 34.

Board diversity policy Reflecting these aspirations, the Board As at 31 December 2021, female
The Board diversity policy (the Policy) will aim to meet any recommendations set representation within the Group Executive
sets out the Board’s approach to diversity out by the FTSE Women Leaders review Committee and their direct reports was
and provides a high-level indication of (formerly the Hampton-Alexander Review). 35 per cent in total (with 20 per cent for
the Board’s approach to inclusion and Female representation on the Board the Group Executive Committee and 37.1
diversity in senior management roles is currently 40 per cent (based on four per cent for their direct reports). Female
which is governed in greater detail female Directors and six male Directors). representation across all senior roles
through the Group’s policies. was 37.7 per cent, and Black, Asian and
The Group has also set a target of 13 per minority ethnic representation in senior
The Board places great emphasis cent of senior roles to be held by Black, roles was 8.8 per cent. The Group’s Race
on ensuring that its membership Asian and minority ethnic executives by Action Plan, which was launched during
reflects diversity in its broadest sense. 2025. The Board will therefore aim over 2020, aims to drive cultural change,
Consideration is given to the combination time to reflect this goal with regard to recruitment and progression across the
of demographics, skills, experience, race, Board members. As at 31 December 2021, Group. This includes a goal to increase
age, gender, educational and professional the Board met, and continues to meet, Black representation in senior roles from
background and other relevant personal the objectives of the Parker Review with at 0.6 per cent to at least 3 per cent by
attributes on the Board to provide the least one Black, Asian and minority ethnic 2025, aligning the Group with the overall
range of perspectives, insights and Board member. UK labour market. Further details of the
challenge needed to support good Race Action Plan, and the Group’s further
decision-making. As noted, the Board places high emphasis achievements in championing inclusion
on ensuring the development of diversity and diversity in its widest sense, can be
New appointments are made on merit, in the senior management roles within found on page 34.
taking account of the specific skills the Group and supports and oversees the
and experience, independence and Group’s ambition of achieving 50 per cent A copy of the Policy is available on our
knowledge needed to ensure a rounded of senior roles held by female executives website at www.lloydsbankinggroup.
Board and the diverse benefits each by 2025, and of 13 per cent of senior roles com/who-we-are/responsible-business/
candidate can bring to the overall Board held by Black, Asian and minority ethnic downloads and further information on the
composition. executives by 2025 (including a minimum Board’s broader approach to diversity and
of 3 per cent of senior roles being held inclusion as part of its strategic priorities,
Objectives for achieving Board diversity by Black heritage colleagues). This is and continued investment in being a
may be set on a regular basis. On underpinned by a range of policies within leading inclusive employer, can be found
gender diversity, the Board is committed the Group to help provide mentoring and on page 34.
to maintaining at least three female development opportunities for female
Board members and over time will aim and Black, Asian and minority ethnic
to reach 50 per cent male and female executives and to ensure unbiased career
representation on the Board to match the progression opportunities. Progress on
50 per cent ambition that the Group has this objective is monitored by the Board
set for female senior executives. and built into its assessment of executive
performance.
90 Lloyds Banking Group Annual Report and Accounts 2021

Audit Committee report

Ensuring oversight of financial and detailed within Disclosure Guidance and

Transparency Rule 7.1.3R.

narrative reporting, and the control During the year the Committee
considered a number of issues relating
environment to the Group’s financial reporting. These
issues are summarised on the following
pages, including discussion of the
conclusions the Committee reached, and
the key factors considered in reaching
Key activities in 2021 these conclusions. In addition, the
Sarah Legg
Committee considered a number of other
Chair, Audit Committee • Assessing the impact of the pandemic issues not related directly to financial
on the financial statements, including
reporting, including internal controls,
expected credit losses and other key
internal audit and external audit. These
aspects of financial reporting.
issues are also discussed in detail on the
• Reviewing the continuous improvement final page of the report.
in financial and regulatory reporting, and
effectiveness of the internal controls.
• Responding to the evolving disclosure Committee composition, skills,
requirements, including climate-related experience and operation
disclosures. The Committee acts independently of the
executive to ensure the interests of the
Our commitment to the Introduction shareholders are properly protected in
continuous improvement of I am pleased to report on how relation to financial reporting and internal
the reporting and control the Committee has discharged its control.
responsibilities during what continues to
environment will be key in be challenging times, and I would like to All members of the Committee are
supporting the strategic thank fellow Committee members for their independent Non-Executive Directors with
development of the Group. contributions, including Nick Prettejohn competence in the financial sector, and their
who stepped down during the course biographies can be found on pages 72 to
of the year. The Committee has also 73. Sarah Legg is a Fellow of the Chartered
benefitted from insight brought by the Institute of Management Accountants and
Ring-Fenced Bank Directors, who attend of the Association of Corporate Treasurers,
Q&A the Committee as observers in order to with extensive knowledge of financial
provide insights on matters relevant to the markets, treasury, risk management and
Given the ongoing pandemic conditions Ring-Fenced Banks and as part of their international accounting standards. She
in 2021, how has the Committee prioritised its role in the Group’s overall governance is a member having recent and relevant
agenda? structure, and from attendance by the financial experience for the purposes of
chairs of the audit committees of Scottish the UK Corporate Governance Code, and
A The Committee has continued to spend
Widows and Lloyds Bank Corporate is the Audit Committee financial expert for
significant time on financial reporting Markets. SEC purposes.
matters involving judgements and estimates,
including economic assumptions. Work Looking forward to 2022, along with During the course of the year, the
in this regard has ensured that changing core responsibilities for the integrity Committee held separate sessions with
economic conditions have been reflected of the financial reporting and control the internal and external audit teams,
appropriately and in a timely manner. environment, the Committee will without members of the executive
Improvements in reporting processes, continue to focus on areas of continuous management present. For details of how
resulting in greater agility, have been improvement on an end to end basis. We the Committee was run, see page 76.
achieved. Mitigation of the impact of the will engage further on the BEIS proposals
pandemic on the reporting and control on audit reform, and with climate-related The Committee normally undertakes an
environment continued to be an important disclosure. Towards the end of 2021, we annual effectiveness review as part of
focus for the Committee. began the process of appointing a new the Board Evaluation process. In line with
External disclosure requirements continued Chief Internal Auditor. the approach agreed by Board to defer
to evolve throughout the year – how has the the review which was due in 2021, the
Committee responded? Committee purpose and responsibilities Committee’s next effectiveness review
A Climate-related disclosures received The purpose of the Committee is to monitor will be conducted in 2022. Details of
increased attention from the Committee in and review the Group’s financial and narrative the rationale for this approach are set
2021. In particular, the work to assess the reporting arrangements, the effectiveness out in the Board Evaluation section of
impact of climate change on the Financial of the internal controls (including over the Corporate Governance Report on
Statements was reviewed, including the financial reporting) and the risk management page 85.
development of the control environment to framework, whistleblowing arrangements
support climate-related disclosures. and each of the internal and external audit While the Committee’s membership
processes. This includes the statutory audit comprises the Non-Executive Directors
How has the Committee overseen the of the consolidated financial statements and noted on page 77, all Non-Executive
transition of the external audit to Deloitte LLP? the independence of the statutory external Directors may attend meetings as agreed
A A smooth transition requires careful auditor. The Committee reports to the Board with the Chair of the Committee. The
planning and co-ordination across both on how it discharges its responsibilities and Group Financial Controller, Chief Internal
organisations. The Committee has overseen makes recommendations to the Board, all of Auditor, the external auditor, the Group
this transition, approving the audit plan and which have been accepted during the year. Chief Executive, the Chief Financial
receiving regular progress reports from A full list of responsibilities is detailed in the Officer and the Chief Risk Officer also
Deloitte LLP. Committee members also Committee’s terms of reference, which can attend meetings as appropriate. Details
meet with the external auditors periodically, be found at www.lloydsbankinggroup.com/ of Committee membership and meeting
providing good opportunity for further who-we-are/group-overview/corporate- attendance can be found on page 77.
insight on topical matters. governance. In satisfying its purpose, the
Committee undertakes the functions
 Lloyds Banking Group Annual Report and Accounts 2021 91

Matters considered during 2021

Jan Feb Apr Jun Jul Oct

Reporting
Review of external reporting documents
Significant accounting judgements
Going concern assumption/viability statement
Regulatory reporting related matters
Climate-related disclosures update
Activities of subsidiary audit committees

Control environment
Control update (including Sarbanes-Oxley)
Annual review of risk management framework and control effectiveness review summary

Group Internal Audit

Reports from Group Internal Audit
External effectiveness report on Group Internal Audit

External audit
Reports from the external auditor including external audit plan
Appointment, remuneration, non-audit services and effectiveness
Deloitte transition activities update, appointment and preliminary audit plan

Other

Governance
Updates on new accounting standards including IFRS17, FRC thematic reviews and the Restoring trust
in audit and corporate governance BEIS consultation
Audit Committee effectiveness review for 2020
Whistleblowing
Updates on Finance strategy

Financial reporting
During the year, and in relation to the year ended 31 December 2021, the Committee considered the following issues relating to the Group’s
financial statements and disclosures, with input from management, the Risk Division, Group Internal Audit and the external auditor.

Activities for the year

Key issues Committee review and conclusion

Allowance for The Group’s impairment Throughout the year, the Committee has challenged the Group’s
provision is dependent on expectations of the economic impact of the COVID-19 pandemic as it has
impairment management’s judgements continued to evolve and reviewed the economic assumptions used to
on loans and on matters such as GDP, calculate the Group’s expected credit loss (ECL).
advances unemployment, house prices At 31 December 2021, the Group’s ECL allowances resulting from
and interest rates, as well as management judgements accounted for £1,284 million, or 32 per cent, of
its assessment of a customer’s the Group’s total ECL (31 December 2020: £1,383 million, or 22 per cent).
current financial position and The Committee has reviewed management’s rationale for these provisions
whether the exposure has and has challenged whether the additional provisions are appropriate.
suffered a significant increase Note 3 to the financial statements includes further detail on the judgements
in credit risk. The Group’s total made by management and the amounts provided for each of the
impairment allowance at 31 judgements made.
December 2021 was £4,042
million (2020: £6,247 million). Conclusion: The Committee was satisfied that the impairment provision
and the disclosures provided in the financial statements were appropriate.
The disclosures relating to impairment provision are set out in note 18 and
note 51 to the financial statements.

Conduct risk During 2021, the Group The Committee has received regular updates on the progress being made
made provisions of £1,300 on the Group’s conduct risk matters including the ongoing review of the
provisions million (2020: £464 million), Group’s handling of HBOS Reading and the General Insurance renewal
including £790 million for the errors which resulted in a £91 million FCA fine. Following the emergence of
HBOS Reading review (2020: the first outcomes from an independent panel that is reassessing direct and
£159 million). Management consequential losses relating to HBOS Reading, the Group has charged a
judgement is used to determine further £790 million in the year ended 31 December 2021.
the population likely to be Conclusion: The Committee has considered management’s assessment
impacted by conduct risk of the Group’s provisions required for its conduct-related matters and was
matters, the cost of remediation satisfied that the provisions were appropriate. The Group’s disclosure is set
and, where appropriate, any out in note 36 to the financial statements.
related administration costs.
92 Lloyds Banking Group Annual Report and Accounts 2021

Audit Committee report continued

Activities for the year continued

Key issues Committee review and conclusion

Going concern The Directors are required to The Committee assisted the Board in determining the appropriateness
confirm whether they have a of adopting the going concern basis of accounting and in performing
and viability reasonable expectation that the the assessment of the viability of the Company and the Group. These
statement Company and the Group will assessments were based on the Group’s operating, funding and capital
be able to continue to operate plans which included consideration of the implications of the COVID-19
and meet their liabilities as they pandemic and climate-related matters on the Group’s performance and
fall due for a specified period. its projected funding and capital position. The Committee also took into
The viability statement must account the results of the Group’s stress testing activities and the principal
also disclose the basis for the and emerging risks, which are set out on pages 140 to 141, page 135 to
Directors’ conclusions and 193 and pages 141 to 142 respectively.
explain why the period chosen is Conclusion: The Committee determined that the going concern basis
appropriate. of accounting was appropriate, advised the Board that three years was a
suitable period of review for the viability statement, and that the viability
statement could be provided. The viability statement is disclosed on
page 43.

Uncertain tax The Group has open tax The Committee reviewed management’s assessment of the Group’s
matters which require it to make uncertain tax positions, which took into account the views of the relevant tax
provisions judgements about the most authorities and any external advice it received. In particular, it considered
likely outcome for the purposes the Group’s claim for group relief of losses incurred in its former Irish
of calculating its tax position. banking subsidiary.
Conclusion: The Committee was satisfied that the provisions and
disclosures made in respect of uncertain tax positions were appropriate.
The relevant disclosures are set out in note 46 of the financial statements.

Retirement The value of the Group’s defined The Committee reviewed the process used by management to determine
benefit pension plan obligations appropriate assumptions to calculate the Group’s defined benefit liabilities.
benefit is determined by making During 2021, these included the discount rate, the future rate of inflation
obligations financial and demographic and expected mortality rates.
assumptions, both of which Conclusion: The Committee was satisfied that management had used
are significant estimates appropriate assumptions that reflected the Group’s most recent experience
made by management. The and were consistent with market data and other information. The
defined benefit obligation at Committee was also satisfied that the Group’s disclosures made in respect
31 December 2021 was £47,130 of retirement benefit obligations are appropriate. The relevant disclosures
million (31 December 2020: are set out in note 34 of the financial statements.
£49,549 million).

Value-in-force Determining the value of the VIF The Committee considered updates from management and from the
asset and insurance liabilities Group’s Insurance Audit Committee summarising its activities, which
(VIF) asset requires management to make included a review of the economic and non-economic assumptions
and insurance significant estimates for both made by management to determine the Group’s VIF asset and insurance
liabilities economic and non-economic liabilities. The most significant assumptions were in respect of workplace
actuarial assumptions. At 31 pension persistency, annuitant longevity and expenses.
December 2021, the Group’s VIF Conclusion: The Committee was satisfied that the assumptions used to
asset was £5,514 million (2020: calculate the VIF asset and liabilities arising from insurance contracts and
£5,617 million) and its liabilities participating investment contracts were appropriate. The disclosures are
arising from insurance contracts set out in note 23 and note 30.
and participating investment
contracts were £123,423 million
(2020: £116,060 million).

Other significant issues • The effectiveness of systems for internal internal controls over financial reporting
The following matters were also considered control, financial reporting and risk under the US Sarbanes-Oxley Act.
by the Committee. management • Specifically the Committee closely
• The extent of the work undertaken monitored the deficiencies identified in
Risk management and internal control across the Group to ensure that the respect of privileged and user access
systems control environment continued to across certain business applications
Full details of the internal control and operate effectively and associated IT infrastructure and the
risk management systems in relation to • The major findings of internal Group’s plans to address the control
the financial reporting process are given investigations into control weaknesses, findings identified.
within the risk management section on fraud or misconduct and management’s
pages 135 to 193. Specific related matters response, along with any control The Committee was satisfied that internal
that the Committee considered for the deficiencies identified through the controls over financial reporting were
year included: assessment of the effectiveness of the appropriately designed and operating
effectively.
 Lloyds Banking Group Annual Report and Accounts 2021 93

Risk-weighted assets (RWA) and regulatory Group Internal Audit External auditor
reporting In monitoring the activity, role and Following an external audit tender in 2018,
Since 2019, the PRA has increased effectiveness of the internal audit Deloitte LLP (Deloitte) was appointed as
its focus on the quality of regulatory function and their audit programme the auditor of the Company and the Group
reporting, emphasising the need for it Committee: with effect from the 2021 financial year.
to be complete, timely and accurate. A • Approved the annual audit plan and Mike Lloyd is the statutory audit partner
number of skilled person independent budget, including resource for the Group and attends all meetings of
reviews have been commissioned across • Reviewed progress against the plan the Committee.
the industry to review the governance, through the year through updates
controls and processes supporting the including quarterly reports on the The Committee oversees the relationship
regulator reporting framework within activities undertaken and six-monthly with the external auditor, including its
firms. As part of our continued focus on reports from the internal audit Quality terms of engagement and remuneration,
strengthening our control environment in Assurance team and monitors its independence and
both financial and regulatory reporting, • Considered the major findings objectivity. During 2021, the Committee
management have established a of significant internal audits, and reviewed Deloitte’s audit plan, including
Regulatory Reporting Review project. management’s response the underlying methodology, and
Involving first, second and third line, this • Monitored the progress of internal Deloitte’s risk identification processes. In
project is reviewing our current regulatory audit’s coverage of key risk themes its assessment of Deloitte’s performance
reporting activities and where necessary, across the Group, including Data Quality and effectiveness, the Committee has
enhancing our governance and control & Ethics, Cyber & Information Security, considered: Deloitte’s interactions
framework. Management provided regular Operational Resilience, Strategic with the Committee; the responses to
updates to the Committee over the year to Delivery and Customer Treatment a questionnaire issued to the Group’s
highlight progress made in improving the • Engaged a third party to opine on businesses, Finance, Risk and Internal
reporting control environment across a the effectiveness of the internal audit Audit; and the Financial Reporting
number of regulatory reports. function, considered the result and Council’s Audit Quality Inspection
monitored progress to address the Report published in July 2021. The
Alternative performance measures findings raised Committee concluded that it was satisfied

Governance
The Committee has reviewed the with the auditor’s performance and
enhancements that management Speak Up (the Group’s whistleblowing recommended to the Board a proposal
has made to the Group’s alternative service) for the reappointment of the auditor at the
performance measures (APMs) disclosures The Committee received and considered Company’s Annual General Meeting.
during the year. Enhancements have reports from management on the Group’s
included additional reconciliations whistleblowing arrangements. The FRC corporate reporting review
between statutory measures and APMs, Committee reviewed the reports to The Committee reviewed a letter received
clear labelling of which of the Group’s key ensure there are arrangements in place from the FRC on its review of the Group’s
performance indicators are APMs and which colleagues can use in confidence 2020 Annual Report and Accounts.
increasing the prominence of the Group’s and without fear of retaliation, to report The FRC’s review was based solely on
statutory disclosures. In the Group’s concerns about inappropriate and the contents of the Annual Report and
Annual Report and Accounts, a separate unacceptable practices, that these Accounts. The FRC had no questions or
section has been created containing a arrangements are well-publicised queries that they wished to raise with the
description of the Group’s APMs, the and that there is proportionate and Group. The FRC highlighted a number of
information that each of them provides independent investigation of such matters areas where it believed that users would
and how the APM is used internally. or appropriate follow up. The Committee benefit from further improvements to the
The Committee was satisfied with the reported on its consideration of disclosures; where appropriate, the Group
approach to APMs and the associated whistleblowing arrangements to the Board. has enhanced these disclosures in its 2021
year-end disclosures. Annual Report and Accounts.
Climate-related financial disclosures Auditor independence and remuneration
The Committee is responsible for Statutory Audit Services compliance
During 2021, the Committee received
establishing the Group’s policies and The Company and the Group confirm
updates on the Group’s plans to
procedures designed to protect the compliance with the provisions of the
develop its climate-related financial
independence and objectivity of the Statutory Audit Services for Large
disclosures and has reviewed the Group’s
external auditor. In April 2021, the Companies Market Investigation
Climate Report, which is in line with the
Committee updated its non-audit services (Mandatory Use of Competitive Tender
recommendations of the Task Force on
policy to reflect the process for PwC Processes and Audit Committee
Climate-related Financial Disclosures
resigning as auditor from each of the Responsibilities) Order 2014, which
(TCFD). The report sets out the climate-
Group’s legal entities. No other substantive relates to the frequency and governance
related governance, strategy and
changes were made to the policy. of tenders for the appointment of the
ambitions of the Group and outlines the
external auditor and the setting of a policy
progress to date against these ambitions The policy details those services that on the provision of non-audit services,
as well as the work being done to manage the auditor is permitted to carry out and for the year to 31 December 2021. There
climate-related risks. The Committee has pre-approves certain of these services are no plans as at the date of this report
also reviewed the results of the Group’s provided the fee is below a threshold; to conduct a tender exercise for external
financial reporting climate risk assessment all other permitted services must be audit services.
and the disclosure enhancements that specifically approved in advance by the
the Group has made to its financial Committee. Prior to the engagement of
statements. The Group will continue to the auditor for a permitted service, the
enhance its climate-related disclosures policy requires that senior management
which will remain an area of focus for the confirms whether the Committee has pre-
Committee. approved the service or specific approval
is required. The total amount of fees paid
to the auditor for both audit and non-
audit related services in 2021 and further
information on the policy is disclosed in
note 12 to the financial statements.
94 Lloyds Banking Group Annual Report and Accounts 2021

Board Risk Committee report

The Committee’s enhanced agenda. Changes included a review of the

volume of routine items considered by the
Committee, allowing greater time to be
approach drives a more forward- spent on key risk topics with an emphasis
on deep dives and greater analysis of
looking risk agenda these areas. The membership of the
Committee has also been reduced,
together with the removal of sub-
committees, and more opportunities
• Ensuring effective support for being created for Committee members to
Catherine Woods customers in financial difficulty, and have unstructured conversations with
Chair, Board delivery of fair and appropriate management. In addition, as part of the
Risk Committee customer outcomes broader review of the Corporate
• Effective management of operational Governance Framework, the Committee’s
resilience risks, including ongoing terms of reference have been reviewed
review of cyber and technology and are being updated, with a particular
investment and risks focus on alignment with the Risk Coalition
• The pace of work, resource and Principles as well as other legal, regulatory
capabilities required to assess climate and best practice standards.
risk impacts and delivery of
commitments The past year has continued to see the
• Effective management of change and pandemic impact the Group’s business, its
The Committee recognises execution risks in the delivery of the customers, and the wider economy. This,
Group’s strategy together with the impacts of the EU exit,
the challenges, and • Effective management of fraud risks, continue to be a key focus for the Group
importance, for both the particularly Authorised Push Payments and the Committee. In addition, the
Group and its customers, in scams increased focus and pace of activity
assessing the impacts of • Management of strategic and emerging around climate risk has been, and will
risks throughout 2022 continue to be, central
climate risk, and the pace of • Ongoing embedding of the Group’s risk to the Committee’s activities.
change required to mitigate culture and control environment
I would also like to take this opportunity to
its potential impacts. thank all the former members of the
Key activities in 2021
Committee for their contribution, and
• Considering the continuing effects of specifically Nick Prettejohn, the former
the pandemic and the UK’s exit from the Committee Chair, for his ongoing support
Q&A EU on credit quality and customers in throughout 2021, as I took on the role of
financial difficulty Chair of the Committee.
How has the Board Risk Committee • Considering progress made in
(the Committee) developed its approach improving support for vulnerable Committee purpose and
in assisting the Board fulfil its risk and
governance roles and responsibilities?
customers and customers in financial responsibilities
difficulty The overriding purpose of the Committee is
A
• Continued focus on the management of to assist the Group’s Board in fulfilling its risk
The Committee has implemented the Group’s operational resilience across governance and oversight roles and
several changes, set out in my introduction non-financial risk areas responsibilities. The Committee is also
below, which help ensure greater focus • Identification of key macro-strategic risk responsible for ensuring the risk culture is
on the most important matters and their themes, and risks associated with the fully embedded and supports at all times the
analysis. This improves the Committee’s Group’s strategic change agenda Group’s agreed risk appetite, covering the
effectiveness in supporting the Board, • Focusing on the Group’s climate risk extent and categories of risk which the Board
and contributes to broader Board and strategy and development of related risk considers as acceptable for the Group. The
Committee enhancements in response to management capabilities enhancements made this year to the way the
feedback from the 2020 Board evaluation. • Reviewing progress in strengthening the Committee operates have strengthened the
Group’s risk culture and control support provided to the Board.
How is the Committee considering the environment
risks associated with climate change? • Review of the Risk function target The Committee is responsible for
operating model, together with reviewing and reporting its conclusions to
A Climate change remains a key issue for consideration of the findings arising the Board on the Group’s risk management
the Group and the Committee. During from an external benchmarking exercise framework, which embraces risk principles,
2021, progress with the Group’s climate • Formal oversight of material regulatory policies, methodologies, systems,
risk strategy was reviewed, together change programmes such as the IBOR processes, procedures and people. It also
with consideration of areas such as transition includes the review of new, or material,
development of sector strategies, targets
amendments to risk principles and policies,
and metrics, capabilities, and the pace Introduction and overseeing any action resulting from
of work required to ensure delivery of I am pleased to report on how the material breaches of such policy.
commitments and requirements. Further Committee has discharged its
information is set out on page 96. responsibilities throughout 2021, my first More details on the Group’s wider
year as Chair of the Committee. Several approach to risk management can be
What are the key areas of focus for the changes were implemented during the found in the risk management section
Committee in 2022? year, simplifying how the Committee on pages 134 to 193. Full details of the
operates and, in doing so, helping ensure Committee’s responsibilities are set out in
A The Committee will continue to
that time is focused on the most important its terms of reference, which can be found
consider the following important areas: matters. This helps strengthen and drive at www.lloydsbankinggroup.com/
• Continuing impacts of the pandemic, more effective support for the Board, who-we-are/group-overview/corporate-
and the UK’s exit from the EU coupled with a more forward-looking governance.
 Lloyds Banking Group Annual Report and Accounts 2021 95

Committee composition, skills, As the most senior risk committee in the the Committee continues to be supported
Group, the Committee interacts with other by the IT and Cyber Advisory Forum,
experience and operation related risk committees, including the which dedicates additional time and
As mentioned in my introduction, the
executive Group Risk Committee. These resource to reviewing and challenging
composition of the Committee was
interactions assist with the agenda risks associated with IT infrastructure, IT
reduced during the year, currently
planning process, where matters strategy, IT resilience and cyber risks, as
consisting of three Non-Executive
considered by the Group Risk Committee highlighted on page 79 in Our focus on
Directors, providing core banking and
are reviewed to ensure escalation of all technology. The Chair and other members
risk knowledge, together with a breadth
relevant matters to the Committee. of the Committee attend this Forum.
of experience which brings a clear
awareness of the importance of putting
the customer at the centre of all that the Matters considered The Board Risk Committee Chair is a
member of the Audit Committee, in
Group does. Two of the three designated by the Committee addition to the Audit Committee Chair
independent Non-Executive Directors of Over the course of the year the
being a member of the Board Risk
the Ring-Fenced Banks also attend Committee considered a wide range of
Committee; this close interaction helps
meetings as observers in order to provide risks facing the Group and its Ring-Fenced
ensure that common issues of interest are
insights on matters relevant to the Banks, both current and forward looking,
addressed appropriately. In addition,
Ring-Fenced Banks when required and as across all key areas of risk management, in
there is regular interaction with the
part of their role in the Group’s overall addition to risk culture and risk appetite.
Responsible Business Committee,
governance structure. The Chief Risk In particular, the Committee considered a
especially on climate change matters, and
Officer has full access to the Committee full refresh of the risk appetite statement
with the Remuneration Committee on the
and attends all meetings. The Chief to ensure Board-level risk appetite
alignment of remuneration to risk
Internal Auditor and members of the remained appropriately focused on key
performance.
executive also attend meetings risks and emerging areas of focus.
as appropriate.
The Committee also reviewed regular
As a result of these reviews, and through
updates from the non-Ring-Fenced Bank
The Committee normally undertakes an the development of the Committee’s
and Insurance sub-groups, headed up by

Governance
annual effectiveness review as part of the overall approach to fulfilling its
Lloyds Bank Corporate Markets plc and
Board evaluation process. In line with the responsibilities, certain risks were
Scottish Widows Group Limited
approach agreed by the Board to defer identified which required further detailed
respectively, summarising key discussions
the review, which was due in 2021, the consideration.
and decisions taken at the relevant
Committee’s next effectiveness review will
entities’ risk committees.
be conducted, and presented to the Set out below and on the following pages
Committee, in 2022. is a summary of the risks considered by
the Committee, with an outline of the
Details of the rationale for this approach material factors considered, and the
are set out in the Board evaluation section conclusions which were ultimately
of the corporate governance report on reached. During 2021, recognising the
page 85. Details of Committee greater focus on key risk topics at regular
membership and meeting attendance Committee meetings, the Committee
during the year can be found on page 77. ceased to use sub-committees. However,

Activities for the year

Risk type Key issues Committee review and conclusion

Conduct risk
Customers in The Group’s During 2021, the Committee received updates on the customers in financial difficulty
financial management of transformation programme, which has delivered extensive improvements to support
difficulty conduct risks and customers returning to financial health as quickly as possible. This included enhancing
issues associated colleague and system capability and ensuring adequate resourcing to support customers
with customers in rolling off COVID-19 payment holidays. The Committee noted continued progress made in
financial difficulty improving customer outcomes through strategic changes such as simplified toolkits, an
and customer improved operating model and greater support for vulnerable customers. The Committee
vulnerability. also acknowledged an improved oversight model, providing greater insight and monitoring of
  all customers falling into financial difficulty. The Group has robust mechanisms in place to
manage and monitor traditional sources of conduct risk. A deep dive on emerging conduct
risk themes, trends and proposed management actions was also discussed during the year.
Conclusion: The Committee recognises the significant work completed to deliver large-scale
improvements for the treatment of customers in financial difficulty. Given the current
economic outlook, focus will remain on ensuring effective support is provided for customers
in financial difficulty and ensuring fair and appropriate customer outcomes are delivered.

Rectifications The Group’s Throughout 2021, the Committee has received updates on the Group’s rectifications portfolio
management of performance, with particular interest in reducing the number of customers awaiting
customer remediation. The Committee has noted continued progress in the pace and quality of
rectifications. remediations, with a reduction in the number of customers awaiting redress and improved
  customer outcomes.
  Conclusion: Root cause analysis and read-across activity continues to improve and embed
across the Group. This will remain an area of focus for the Committee in 2022.
96 Lloyds Banking Group Annual Report and Accounts 2021

Board Risk Committee report continued

Activities for the year continued

Risk type Key issues Committee review and conclusion

Conduct risk continued

Complaints Ensuring the The Committee continues to focus on ensuring the Group has an effective framework for
Group is resolving managing complaints, including root cause analysis, to establish lessons learned and help
customer prevent similar issues in the future. Ongoing focus continues to be given to complaint
complaints in a resolution via Board risk appetite metrics, including volume and Financial Ombudsman
timely and fair Service feedback. The Committee has remained close to the execution of the plan, which saw
manner, and the business return to previous operational performance levels following significant backlogs
eradicating the caused by the pandemic during 2020.
causes for Conclusion: The Committee is satisfied with the progress that has been made in addressing
complaints the backlogs resulting from the pandemic and will continue to focus on ensuring the Group is
through root resolving customer complaints in a fair and timely manner, alongside reducing the causes for
cause analysis. customers to complain through effective root cause analysis.

Climate risk
Climate risk Climate change, Climate risk remains a key issue for the Group, with regular updates provided to the
sustainability and Committee on the Group’s climate risk management activities and impacts on key sectors,
the potential together with a deep dive on climate risk strategy. This has included progress made against
impact to the the requirements of the PRA Supervisory Statement on enhancing banks’ and insurers’
Group and on approaches to managing the financial risks from climate change, and the recommendations of
our customers. the Task Force on Climate-related Financial Disclosures (TCFD).
The Committee has provided input on the climate risk strategy and its support for the
ongoing and proposed work on targets and metrics. The Committee has been informed on
discussions regarding high-level participation choices, developing sector strategies and
portfolio alignment considerations from both a sector and product perspective.
The Committee continues to ensure that the Group’s risk management capabilities are
developing at pace, and that it is adopting a proactive response to the challenges, risks and
opportunities arising from climate change. The Committee was engaged on the development
of climate-related management information for input into future expectations and on the
Group’s approach to setting further quantitative and qualitative risk appetite metrics as
capabilities evolve. The Committee has also been involved in the development of stress
testing capabilities for climate risk, which were used in the Bank of England’s Climate Biennial
Exploratory Scenario (CBES).
Conclusion: The Committee has been satisfied with the progress made in 2021, however
focus will remain on ensuring the pace of work is maintained in 2022 and beyond. The
Committee will continue to closely monitor climate-related risks, assessing both the impact on
the Group and its customers, and the delivery of climate-related commitments, data
requirements and Board risk appetite metrics.

Financial risk – covering credit and market risk

Commercial Risks and external The Committee provided oversight of the Commercial Banking portfolio via regular credit
credit quality threats to the quality papers, sector deep dives, spotlight reviews, including large single name exposures,
commercial credit and updates on climate risk and opportunities.
performance, Detailed reviews have allowed the Committee to assess risk levels and credit exposures,
including including repayment performance of pandemic-related Government-backed funding, as well
pandemic-related as levels of credit risk rating downgrades and clients requiring closer risk management; noting
impacts, together that excess market liquidity and support schemes continue to distort true underlying portfolio
with sectors risk. The Committee noted that anticipated flows into arrears have not yet materialised; but
potentially exposed defaults are expected to increase throughout 2022, as a result of support scheme closures
to the impact of EU and other economic headwinds, including inflation risk and supply chain issues across the
exit and climate system.
risks.
The Committee also reviewed pandemic-related and emerging risks across a range of sectors,
including those considered more vulnerable to the wider economic backdrop or structural
change, those potentially exposed to the impacts of the UK’s exit from the EU, and those
exposed to increased levels of physical and transitional climate risk. Specific consideration was
also given to the Group’s Commercial Real Estate lending and commercial exposure to the
automotive sector.
Conclusion: While recognising the risks in the portfolio, the Committee was satisfied that
management were continuing to take appropriate action to mitigate and address current and
horizon risks, while preparing to manage an expected increase in defaults.
 Lloyds Banking Group Annual Report and Accounts 2021 97

Activities for the year continued

Risk type Key issues Committee review and conclusion

Financial risk – covering credit and market risk continued

Retail credit Risks relating to The Committee reviewed the performance of the Retail portfolio via regular credit quality
quality Retail lending, updates including deep dive reviews on consumer lending, the housing market, retail
including impacts exposures to the automotive sector and the legacy mortgage portfolio.
of the pandemic Credit risk remained in appetite as key Government support measures came to an end,
and climate- including furlough and payment holidays. The Committee noted that early arrears remained at
related risks. Areas low levels, helped by the proactive management actions taken to prevent risk emergence. The
such as Retail Group continues to closely monitor and manage higher risk segments, such as customers with
secured lending, higher indebtedness levels or those on reduced incomes because of the pandemic.
Buy-To-Let, Motor,
Business Banking Special consideration was also given to the legacy mortgage portfolio (originated during the
and unsecured period 2006 to 2008), which continues to run off and was not disproportionately impacted
portfolios, during the pandemic. Enhanced monitoring is in place to provide early warning of any adverse
together with trends requiring further action.
customer Conclusion: The Committee is satisfied that appropriate lending controls and monitoring are
indebtedness. in place to control risks across the Retail lending portfolios and that there is an effective
framework in place for ongoing risk management.

Balance sheet Management of A key focus for the Group in 2021 has been the management of the balance sheet and the
management the Group’s resulting market and liquidity risks through a period of unprecedented growth in deposits and
and structural balance sheet and uncertainty over future customer behaviour. An update was presented to the Committee
hedge structural hedging providing an overview of the deposit growth since the beginning of 2020, reflecting the

Governance
programme, given current and future stability of deposits and the key implications for the balance sheet.
the impact of The Committee discussed the risks associated with the current strategy, the governance
significant framework supporting the decisions and the implications should customer behaviour not
customer deposit match expectations. The Committee also noted an assessment of the structural hedging
growth since the programme in comparison to other potential approaches.
onset of the
pandemic. Conclusion: Proactive management and close monitoring of the associated risks continue,
with a focus on the evolving macroeconomic outlook and the implications for customer
behaviour. The Committee was satisfied that management were taking the appropriate
actions to monitor and mitigate the risks, while recognising that this will remain a key priority
in 2022.

Model risk Model risk The Committee received updates on progress to satisfy prudential modelling requirements
continues to be an relating to regulatory changes in credit risk capital models (primarily the new Capital
area of significant Requirements Directive (CRD) IV regulations) and market risk models within IBOR transition
activity and activities, including model risk management and governance approach. Actions in progress
importance, both include increasing resources available as necessary, and enhancing model risk management
internally and and governance to meet the increasing internal and external demands.
externally.  The Committee was also kept abreast of model performance in the pandemic-affected
economic environment and the ongoing development of further modelling capability for new
and emerging risks, such as climate risk.
Conclusion: There is ongoing communication with the PRA regarding prudential change to
ensure that CRDIV and IBOR submissions fulfil their requirements. In terms of performance,
the models have functioned adequately under the uncertain economic environment, with
some post model adjustments and overlays applied to account for credit process changes
due to customer and government support measures. Monitoring will continue as the economy
recovers.

Operational risk
One RCSA The adoption of Following pilot activity, the Committee supported the adoption of this new approach across
implementation One Risk and the Group through a phased implementation. The two-year plan for initial implementation
Control Self- completed at the end of 2021, with divisional risk profiles now incorporating both applicable
Assessment (One risks for the specialist risk categories alongside the severe and materials risks to business
RCSA) is part of objectives. The focus is now on embedding One RCSA across the Group to ensure that risk
the Group’s risk practices, data quality, culture and capability continue to mature in line with the expectations.
and control Conclusion: All aspects of the 2021 plan for One RCSA have been delivered. The Committee
strategy to deliver will monitor the ongoing activity to further embed One RCSA and strengthen the overall
a stronger risk control environment with greater automation of controls expected.
culture and
simplified risk and
control
environment.
98 Lloyds Banking Group Annual Report and Accounts 2021

Board Risk Committee report continued

Activities for the year continued

Risk type Key issues Committee review and conclusion

Operational Risk continued

Operational Operational Managing resilience risks from the ongoing pandemic has remained a key priority for the
resilience resilience is one of Group in 2021, alongside responding to the Regulators’ Policy Statements on Operational
the Group’s most Resilience, published in March 2021. Multiple updates were presented to the Committee
important covering operational resilience investment and risk; third and fourth-party supplier risk
non-financial risks, management and the Group’s outsourcing strategy; and cyber risk and IT resilience deep-
as exemplified dives. Given the significance of the risk to the Group, the Committee is supported by the IT
during and Cyber Advisory Forum specifically focused on IT and cyber risks.
the ongoing Conclusion: The Committee remains highly focused on the operational resilience of the
pandemic and the Group’s services and has drawn valuable insight from the discussions this year. The Committee
introduction of considers that governance of operational resilience risk is robust and meets new regulatory
operational requirements, and that activities in plan will support the ongoing resilience of key services to
resilience the Group’s customers.
regulatory policy
statements.

Data risk The Group’s data Data risk continues to be an area of significant regulatory and media attention. The Group has
governance, developed a data strategy to provide the common framework and direction required to
management, improve data across the Group. The Committee considered a deep dive of this and is
privacy and ethics supportive of the strategy, which includes building robust data foundations, enhancing data
risks, including architecture and tooling, improved data culture and delivering increased insights to our
compliance with colleagues and customers. The Committee acknowledges the need for continued investment
the General Data in managing risks relating to improving data quality, ethical use of data, advanced analytics
Protection and artificial intelligence together with continued monitoring of regulatory developments.
Regulation (GDPR), Conclusion: The Committee supports the strengthening of the delivery of the data strategy
Basel Committee and uplifting data culture and capability in order to deliver the Group’s strategic
of Banking transformation.
Supervision
(BCBS239) and the
associated risks
and controls.

People risk Ensuring the People risk remains an area of heightened focus as impacts from the pandemic continue to be
Group has the felt across the Group’s workforce. Future ways of working and return to offices have been key
right capabilities considerations and close monitoring of colleague sentiment around these continue. Updates
and culture as we to the Committee have focused on deep dives into the people risk profile and people risks
continue our relating to the Group’s cloud transformation, with retention risk across key subject matter
transformation and experts closely monitored.
adopt new ways Conclusion: The Committee is satisfied that the people risk profile is being managed
of working. effectively as the Group manages the ongoing impacts of the pandemic, monitors retention,
develops new ways of working and builds skills and capabilities for the future. Given the
importance of this risk, people risk will remain a key area of focus for 2022.

Change and Risks associated The Group continues to enhance and mature its ability to define, measure and report change
execution risk with the extensive and execution risk through consolidated risk reporting, related Board risk appetite metrics
current and future and evolution of change method. The Committee considers change and execution risk within
Group strategic other linked risk types, such as operational resilience and supplier risks, and when investment
change agenda, activities are discussed. The 2020 focus on effective and efficient reprioritisation and
recognising management of change activity during the pandemic has continued throughout 2021,
challenges faced supporting safe delivery of prioritised change activity. In addition, 2021 has seen significant
in ensuring both focus on planning for evolution and enhancement of the change risk and control framework,
successful delivery together with focus on change capability to support the Group’s business and technology
and embedding of transformation plans. Particular consideration was given to the impact of public cloud
change. adoption on the Group’s risk profile, with a review of the key risks also covered by the IT and
Cyber Advisory Forum.
Conclusion: The Committee will continue its focus on the management of change and
execution risk within appetite and on monitoring ongoing progress with enhancement of the
change delivery approach, change risk controls and the evolution required to support
technology and strategic change activities.
 Lloyds Banking Group Annual Report and Accounts 2021 99

Activities for the year continued

Risk type Key issues Committee review and conclusion

Operational risk continued

Fraud The Group’s The Committee recognises the Group’s continued efforts to fight fraud and reduce the impact
management of it has on the bank’s customers, especially with regard to Authorised Push Payment (APP)
fraud risk, while scams, while also acknowledging that there has been a significant growth in APP scam cases
continuing to across the industry in the past year. However, against this backdrop, the Group has continued
minimise the to improve its preventative and detective methodologies and therefore the value of the
impact to genuine Group’s cases has not increased at the same rate.
customer journeys. The Committee received an update on pandemic-related government-backed lending
schemes and acknowledged the Group’s commitment to working with law enforcement and
government agencies to share intelligence and combine investigations. The Committee noted
that fraud within these schemes remains low and within appetite.
Conclusion: The Committee accepts that further and continuous investment in our fraud
defences, tools and resources is needed. It was also agreed that the Group should develop an
enhanced external engagement strategy, to champion a cross-industry response to this
growing threat.

Money The Group’s The Committee acknowledged the Group’s continued efforts to fight financial crime as set out
laundering and management of in the Money Laundering Reporting Officer’s Report. The Committee recognised the gap
financial crime financial crime analysis work completed in response to an FCA ‘Dear CEO’ letter on common gaps in retail
risks and efforts to banks’ controls and was reassured there were no new issues identified.
advance its The Committee was satisfied with the progress made regarding the new Accountable Role

Governance
transaction Holder Framework, and the consolidation of four policies into a single Economic Crime Policy,
monitoring and aligned to the UK’s Economic Crime Reform Programme.
OKYC practices.
The Committee accepted that transaction monitoring, both in terms of systems and
methodologies, was an area of continued focus, as well as improving and advancing the
Group’s Ongoing Know Your Customer (OKYC) programme in Commercial Banking.
Conclusion: The Committee acknowledged the standard of compliance documented in the
Money Laundering Reporting Officer’s Report, and the action plans in place to help the Group
realise its transaction monitoring and OKYC ambitions.

Other categories
Regulatory Managing The Committee has provided effective oversight and ensured effective controls are in place to
and legal risk regulatory and comply with existing regulatory obligations, including consideration of these at an individual
litigation risk is a legal entity level. The Committee considered regular updates on emerging regulatory and
key focus within legal risks such as customer treatment (customers in financial difficulty and consumer duty),
the Group, with a and inclusion and diversity.
significant amount In addition, the Committee has continued to closely monitor a number of significant
of highly complex regulatory change and oversight programmes to ensure successful execution, such as risk free
and rates transition; CRDIV; resolvability; operational resilience; and financial risks from climate
interdependent change.
regulatory
Conclusion: The Group places significant focus on complex regulatory changes and litigation
interactions
risk, as well as ensuring effective horizon scanning of upcoming trends and evolving risks. The
managed during
Committee has discussed the topics raised, and will continue to closely monitor compliance
2021, which will
with regulatory requirements in 2022.
continue to require
management into
2022.

Emerging and Embedding the As part of the deep dive reviews during 2021, the Committee reviewed both the current risks
strategic risk Group’s strategic and emerging risks. In addition, work has been progressed in 2021 on a quantitative risk
categories risk framework, assessment (QRA) approach, culminating in identification of key macro-strategic risk themes,
including the for consideration in strategic planning. The Committee has considered the QRA methodology
methodology for and discussed the findings, approving the Group’s macro-strategic risk themes. The
analysing Committee has also considered the proposed steps for evolving strategic risk further in 2022
emerging and by incorporating it into the Group’s planning and forecasting processes.
strategic risks, and Conclusion: Managing individual risks, as well as the cumulative challenges of connected
approval of key risks, will be essential for protecting the Group’s customers, while delivering the Group’s
strategic risk strategic vision. Incorporation of strategic risk into strategy, business planning and investment
themes. decisions is a vital component of this. Looking ahead to 2022, the Committee will review how
the Group is expanding on external benchmarking and emerging risks, and how they are
maintained and translate into principal risks.
100 Lloyds Banking Group Annual Report and Accounts 2021

Responsible Business Committee report

Responsible Business is at the core of behaviours. Our ‘deep dive’ into the
Motor Sector Emissions Target, which
is very significant as regards Scope 3,
our purpose to Help Britain Prosper helped us understand the methodology
more fully and gain confidence in the
proposed approach, creating a useful
benchmark for other market sectors.
• Culture – We supported the progress
being made on the wider cultural
What are the key areas of focus for the activity and stressed the importance
Amanda Mackenzie Committee in 2022? of continuing the transformative work,
Chair, Responsible which had accelerated in response to
Business Committee A The key elements of our responsible COVID-19 and now needs to connect the
business strategy will include plans for net zero; purpose to colleagues’ individual roles.
nature stewardship; wellbeing; inclusion and • Inclusion and diversity – The Committee
our role as a responsible employer. We will was pleased with the progress being
review employee satisfaction surveys, gender made and the significant and broad
and race metrics and cultural indicators. range of activities delivered through the
Group’s Race Action Plan. We asked the
Our role in society as we embed our purpose executive to ensure the pace of action
will be in helping tackle the social and and the role the Group could play more
economic issues facing the UK as one of the generally and in society as a diverse and
The breadth of responsible country’s leading financial services providers. inclusive employer. The target for Black
heritage colleagues was endorsed and
business practice is
Introduction encouraged by the Committee. Both
increasingly intrinsic to the I assumed the role of Chair of the gender and race targets are part of the
way the best businesses Responsible Business Committee in Helping Britain Recover commitments.
operate. Fairness and May 2021. I am pleased to report on • Workforce engagement – In 2021 the
how the Committee has discharged its Committee became the designated
sustainability being at the responsibilities during the year. Firstly, I body to fulfil the Board’s workforce
heart of how decisions would like to thank Sara Weller on behalf engagement obligations and receives
quarterly updates on engagement
are made. of the Committee for her excellent work
activity, reporting at least annually to the
in chairing the Committee since its
establishment in July 2015. Board on key themes and issues. Please
refer to page 27 for more details on how
Q&A the Board engages with the Group’s
We took the opportunity on Sara’s retirement
to reflect on the Group’s evolution from workforce.
What are your main reflections since a company that practises corporate
becoming Chair of the Committee? responsibility to one where purpose is Committee purpose and
integral to business strategy. In handing the responsibilities
A For many years the Group has been in the
Chair to me, Sara rightly observed we are The Committee’s purpose is to support the
service of Britain. It has been at the forefront
merely ‘stewards’. I will do my very best to be Board in overseeing the Company’s policies,
of responsible business best practice. From
a good steward and see my role and that of performance and priorities as a responsible
the setting up of the Foundations to being
the Committee as helping the Group build business and to oversee the Company’s
the first FTSE 100 to set gender and race
an impressive legacy. activities in relation to all stakeholders
targets and it was the first UK bank to have
set an ambition to reduce the emissions including customers, shareholders,
Our key areas of focus in 2021: colleagues, suppliers, the wider community
we finance by more than 50 per cent by
2030. The Committee can best support
• Helping Britain Recover commitments and the environment. The Committee’s
– In our oversight of the overall approach to terms of reference can be found at www.
the Group’s evolving purpose and strategy
Helping Britain Recover and performance lloydsbankinggroup.com/who-we-are/
by constantly learning and challenging
against the commitments, attention was group-overview/corporate-governance.
ourselves that we are living up to its promise.
given to refining the commitments and
underlying metrics, encouraging the
What role did the Committee play in the
executive to think about the interplay of Committee composition, skills,
evolution of the Group’s purpose?
environmental sustainability and building experience and operation
A There is a lot of expertise across the Board an inclusive society. The Committee, which met on four occasions
which supported the executive plans to • Responsible business activity – In in 2021, is composed of Non-Executive
embed our purpose across the Group. What overseeing the Group’s approach Directors and is attended by the Group
is expected today in response to the current to delivering a positive impact in Chief Executive. It benefits from a broad
environment and changing customer needs communities, we were especially range of differing perspectives, insight and
requires us together to be more thoughtful, interested in the digital skills experience, with representatives from Group
more demanding, and more determined. programme and the development and Internal Audit and the Chief Operating Office
delivery of the vulnerable customer attending meetings as appropriate. Details
Our ambition to become a purpose-driven strategy, with focus on online fraud of Committee membership and meeting
organisation was therefore a significant area cases linked to vulnerability. attendance can be found on page 77.
of discussion and debate. The measurement • Environmental sustainability – It’s clear
that we agree for this next phase of the sustainability is a strategic priority, and In line with the approach agreed by the
strategy will be reviewed at the Committee we must think of it as a growth driver Board, set out in the Board Evaluation
so our role will continue in supporting the as well as a risk to be managed. The section of the Corporate Governance
Board in ensuring that the Group’s agreed Committee support the Group’s net-zero Report, the Committee’s next
intentions are on course and effectively ambitions and sought assurance from effectiveness review will be conducted,
carried out. the executive that there will be clear and presented to the Committee, in 2022.
and transparent accountability, as well
as targets and metrics to drive the right
 Lloyds Banking Group Annual Report and Accounts 2021 101

Directors’ remuneration report

Remuneration Committee Chair’s statement

Dear shareholder This adjustment applied to the whole pool
Alan Dickinson ensures there is alignment with the impact
Chair, Remuneration Committee On behalf of the Board, I am pleased to on shareholders.
present the Directors’ remuneration report
for the year ended 31 December 2021. When discussing the allocation of the
pool, the Committee wanted to ensure
2021 has been another extraordinarily that customer-facing colleagues received
challenging year in which the Group has awards that reflected the hard work and
sought to do all that we can to Help Britain commitment to customers shown through
Recover as part of our Group purpose of 2021 and supported the Group Chief
Helping Britain Prosper. Our priority has Executive’s decision to allocate a higher
been assisting our personal customers, proportion of the pool to those colleagues.
businesses and the communities in which
As a result of external events we operate to deal with the financial In considering the vesting outcome for
consequences caused by the pandemic. the Executive Group Ownership Share
colleagues reward last year What has been achieved has once again awards granted in 2019, the Committee
was impacted by a sharp fall required an enormous amount of sustained discussed each measure and considered
in profitability. This year, effort and commitment from our people. that these awards were intended to reward
long-term performance and strategic
with the recovery, Last year, despite that tremendous delivery. The Group’s economic profit has
colleagues rightly benefit as work, often above and beyond normal improved despite the challenging income
we reward their hard work. commitments, the Committee took environment and there has been strong
the decision that, in the exceptional progress against customer measures which

Governance
circumstances arising from the pandemic, align to the Group’s ambition to be the
as well as to reflect the Group’s reduced Best Bank for Customers. Overall, the 2019
profitability in 2020 and align with the plan vests at 41.8 per cent of maximum.
Remuneration principles
experience of shareholders, no bonuses
(Group Performance Share) would be With respect to the provision taken for
Our performance and remuneration
awarded to any colleagues. That decision the independent review of compensation
philosophy is built on four core reward
has had a significant impact on the for customers of HBOS Reading, the
principles:
motivation of our workforce and retention of Remuneration Committee is considering
talent through 2021, which the Committee whether performance adjustments are
• Purpose: Remuneration should be has monitored closely. Given the improved appropriate for a number of individuals.
linked to the Group’s purpose of
performance of the Group in 2021 and Pending such further consideration, variable
Helping Britain Prosper
the continued hard work of our people, remuneration awards and vestings for 2022
the Committee felt it was important to will be frozen for former Executive Directors
• Behaviours: Remuneration should reward them for their commitment and (the former Group Chief Executive, former
reward and drive the right behaviours contribution. We are pleased that the Chief Financial Officer and former Chief
and outcomes and reflect both materially greater profitability of the Group Operating Officer). The former Group Chief
strategic (non-financial) and financial has enabled this to be possible. Executive and former Chief Operating
achievements Officer voluntarily withdrew from the
As we deliver the next phase of the 2019 GPS awards as a result of the overall
• Simplicity: Remuneration should be Group’s strategy, it remains crucial that we performance of the Group and the issues
designed in a manner that is clear are able to attract and retain critical talent faced during 2019, including publication
for all stakeholders and reflects their and reward our colleagues appropriately of the Cranston report.
experience while maintaining the continuing strong
link to the interests of shareholders Executive Director remuneration outcomes
• Clarity: Remuneration should be easy and responding to the broader societal The Group welcomed Charlie Nunn as
to explain and viewed as fair challenges evolving around us. Group Chief Executive in August 2021,
taking over from Sir António Horta-Osório
Our reward principles ensure fair 2021 variable reward outcomes who retired from the Group on 30 April
reward outcomes that are linked to our To ensure consistency, the Committee 2021. William Chalmers assumed the role
purpose, Group’s performance and the felt that it was important to operate the for the interim period from 1 May 2021
experiences of our shareholder and same framework for determining Group to 15 August 2021. As a result of these
investors. Performance Share awards in 2021 as it did in changes during the year, reporting is
2020, including applying a profit threshold. more complicated and we have therefore
provided additional explanation to
Given a stronger economic environment support the mandatory disclosures.
Remuneration content
and financial performance, which has I would highlight the following:
Chair’s statement pages 101–102 enabled the reinstatement of capital
Remuneration
distributions, the Committee has • In aggregate the single total
approved a Group Performance Share remuneration for the three individuals in
at a glance page 103 pool of £399 million. The 2021 pool the role of Group Chief Executive during
2021 annual report on reflects a collective adjustment of 2021 is £8.9 million, but excluding one-
remuneration pages 104–121 £83 million, including adjustments for the off buy out awards granted to Charlie
fine from the Financial Conduct Authority Nunn is £4.6 million. On this underlying
Other remuneration in 2021 in respect of insurance renewal basis, this is an increase of 28 per cent
disclosures documentation and the provision for the compared to full year 2020 but reflects
(Pillar III reporting) pages 122–129 independent review of the compensation the fact no bonus was awarded in 2020.
for customers of HBOS Reading.
102 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

• Excluding the one-off buy-out awards reflected in the vesting of awards and has Responding to feedback
granted to Charlie Nunn, the CEO pay therefore included specific consideration For 2021 we simplified our Group
ratio is 117:1. This is a 23 per cent increase of this within the ‘pre-vest test’. Full details scorecard to seven performance measures,
on 2020 when no bonuses were awarded. of the 2022 LTSP award can be found on weighted equally between areas of
• Sir António Horta-Osório was eligible to page 115. LTSP awards will be granted financial and non-financial focus with 15 per
receive a pro-rata Group Performance to senior colleagues, to ensure there is cent of the scorecard assessing progress
Share award for the period 1 January alignment to shareholder experience on specific ESG metrics for our climate
2021 to his retirement date on 30 April and retain critical talent through the next and diversity ambitions. We believe this
2021. The Committee determined an phase of the Group’s strategic delivery. simplified approach, supported by use of
award of £345,059 in line with Group careful and balanced judgement, ensures
performance, as outlined on page Shareholding and post-employment that our remuneration aligns to the Group’s
105. In addition, under the rules of the shareholding requirements performance, purpose and strategy as
Executive Group Ownership Share We have closely monitored the ongoing well as taking into account shareholder
awards made in 2019 and 2020, awards developments in policy expectations for interests. With greater focus on integrating
are pro-rated to the retirement date. senior executives after leaving their posts societal purpose and environmental
and as a result, from 1 January 2022, the aspects into our strategic delivery, the
A 1 per cent pay increase is proposed current Group Chief Executive and Chief Committee is aware of the importance of
for the Executive Directors. This Financial Officer will be subject to a post- continuing to develop a framework within
demonstrates continued restraint in employment shareholding requirement which remuneration decisions are made to
executive remuneration, and compares to for two years. This will require them to ensure that they incentivise the required
pay increases of 4 per cent or higher for maintain their shareholdings at a level behaviours and performance.
two-thirds of our junior colleagues. equal to the lower of the shareholding
requirement immediately prior to During 2021, I took the opportunity to listen
The Committee determined that a Group departure or the actual shareholding to a broad range of shareholders and other
Performance Share (annual bonus) award on departure. Nominee arrangements key stakeholders. You told me that your main
of £348,648 should be made to the Group are also in place to assist with enforcing focus continues to be ensuring there is a clear
Chief Executive. This award is pro-rated shareholding requirements. To fulfil the alignment between business strategy and
for the period from 16 August 2021 to requirement the Group Chief Executive performance and executive remuneration
31 December 2021 and is in line with the and Chief Financial Officer (and at a later outcomes, with a specific focus on ensuring
Group performance as assessed by the date, any new Executive Director) will be that ESG measures are incorporated into the
Committee and outlined on page 105. An contractually bound not to dispose of a set performance assessment.
award of £704,627 was determined for the number of shares which will be confirmed
Chief Financial Officer reflecting the joint prior to their departure. We have reviewed Aligned to your feedback, we have made
roles and responsibilities performed while our current shareholding policy and a limited but important change to the
acting as Interim Group Chief Executive as subject to shareholder approval at the Group scorecard for 2022, to bring greater
outlined on page 105. AGM in 2023, the intention will be to align focus on our climate change ambitions
the shareholding policy for Executive and ensure our purpose of Helping Britain
To ensure that the Group Chief Executive Directors with other members of Senior Prosper is at the heart of everything we do.
and Chief Financial Officer are aligned Management and increase the timeframe For 2022, ESG metrics aligned directly to
to the long-term success of the Group by which the shareholding requirement our public commitments on climate change
and motivated to deliver the next phase should be achieved from three to five and promoting inclusion and diversity will
of the Group’s strategy and sustainable years from their commencement date. account for 17.5 per cent of the scorecard.
returns, the Remuneration Committee
has awarded 2022 Long Term Share Plan Wider workforce engagement Future strategic alignment
awards of 150 per cent of salary to the The Committee regularly seeks input Responding to the Group Chief
Group Chief Executive and the Chief from a wide range of sources, including Executive’s strategy announcements, the
Financial Officer to reflect the Group’s reviewing the annual colleague Committee will undertake a policy review
performance in 2021 and other factors engagement survey and feedback from to ensure the remuneration framework
taken into account in the ‘pre-grant test’ as our recognised unions. We know that aligns and supports the successful
outlined on page 115. The normal range many colleagues were unhappy with the delivery of the strategy. We will engage
for awards for Executive Directors is 125 decision not to pay bonuses for 2020 shareholders through 2022 on changes
per cent to 150 per cent of salary. performance and that this had an impact proposed for the next Policy cycle.
on the colleague survey results where
The level of award for the Group Chief engagement levels dropped year-on- Together with my Committee members,
Executive acknowledges that prior to joining, year. Some colleagues also feel the pay I look forward to hearing your views on the
Charlie Nunn agreed to voluntarily reduce increases in 2021 were disappointing given remuneration arrangements outlined in
the maximum opportunity from 200 per cent the current rate of inflation. Management the report and hope we will receive your
under the approved Directors’ Remuneration has listened to colleague feedback and support at the upcoming AGM.
Policy to 150 per cent. Consistent with the sought to prioritise spend towards junior
awards for 2020 performance granted in colleagues and provide pay progression On behalf of the Board
March 2021, these 2022 awards are subject for colleagues more broadly. The 2022
to underpins for the first three years which pay budget provides for a minimum pay
align the vesting outcomes to longer-term increase of £1,000 for junior colleagues.
shareholder experience and are deferred The minimum salary in our organisation will
for up to seven years. rise to £10.60 per hour (£19,292). With Flex
cash included, this equates to a £20,000
For 2022 awards, the Committee felt that minimum starting rate for new joiners. Our Alan Dickinson
it was important that progress toward pay proposal is subject to a ballot of each Chair, Remuneration Committee
climate change commitments should be union’s members.
 Lloyds Banking Group Annual Report and Accounts 2021 103

2021 Remuneration at a glance

Our remuneration package Group Performance Share
Short Term
The below summarises the different Fixed Share Award Variable (Annual Bonus)
remuneration elements for Executive
Directors.
To ensure that total fixed remuneration is To incentivise and reward the achievement
commensurate with role and to provide a of the Group’s annual financial and
Base Salary competitive reward package for Executive strategic targets whilst supporting
Directors with an appropriate balance of the delivery of long term superior and
fixed and variable remuneration, in line sustainable returns.
To support the recruitment and retention with regulatory requirements.
of Executive Directors of the calibre
Long Term
required to develop and deliver the Variable Long Term Share Plan
Group’s strategic priorities. Base salary Pension
reflects the role of the individual, taking
Long term variable reward opportunity to
account of market competitiveness,
To provide cost effective and market align executive management incentives
responsibilities and experience, and pay in
competitive retirement benefits, and behaviours to the Group’s objectives
the Group as a whole.
supporting Executive Directors in building of delivering long term superior and
long-term retirement savings. Executive sustainable returns. The Long Term Share
Benefits Directors employer pension contributions Plan will incentivise stewardship over a
are aligned with those available to the long time horizon and promote good
majority of the workforce. governance through a simple alignment
To provide flexible benefits as part of with the interest of shareholders.
a competitive remuneration package.

Governance
2021 Total annualised remuneration (£000) 2021 Group balanced scorecard performance

Group Chief Executive

62.8% Despite the challenging economic conditions
our Group balanced scorecard reflects an
otherwise resilient performance. Further
£2,698 £904
details can be found on page 105.
2020 £3,602

£2,494 £934 £1,199

2021 £4,627

2021 Group Performance Share (GPS) Pool

Chief Financial Officer

£1,477
£399m The Committee determined a GPS pool for
2021 of £399 million based on 5 per cent
of underlying profit, adjusted for risk and
2020 £1,477 other factors.
£1,483 £465
2021 £1,948

Long Term Share Plan (LTSP) 2022 Award

Key

Fixed Pay
2022 Long Term Share Plan awards of 150 per cent of salary
Short Term Variable will be made to the Group Chief Executive and the Chief
Financial Officer to reflect the Group’s performance in 2021
Long Term Variable and other factors taken into account in the ‘pre-grant test’.
The Remuneration Committee considered the awards to be
appropriate, reflecting Group and individual contribution in 2021
Group Chief Executive (see page 115).
The single total remuneration for the three individuals in the
role of Group Chief Executive during 2021, excluding one-off
buy out awards is £4.6 million. This is an increase of 28 per cent
2019 Executive Group Ownership Share
compared to 2020, but reflects the fact no bonus was awarded
in 2020.

Chief Financial Officer 41.8%

Total vesting
The Group’s economic profit has
improved despite the challenging income
environment and there has been strong
The annualised single total remuneration for the Chief
Financial Officer excluding deputisation payment for the progress against customer measures.
period as Interim Group Chief Executive is £1.9 million, a 32 Overall, the 2019 plan is vesting at
per cent increase compared to 2020, but reflects no bonus was 41.8 per cent of maximum.
awarded in 2020.
104 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

2021 annual report on remuneration

Executive Director single total figure of remuneration (audited)
Charlie Nunn1 William Chalmers2 Sir António Horta-Osório3 Totals
£000 2021 2020 2021 2020 2021 2020 2021 2020

Base salary 426 – 901 807 432 1,295 1,759 2,102

Fixed Share Award 6
402 – 569 504 346 1,050 1,317 1,554
Benefits 51 – 46 45 134 159 231 204
Pension 64 – 122 121 60 194 246 315
Total fixed pay 943 – 1,638 1,477 972 2,698 3,553 4,175
Group Performance Share 349 – 705 – 345 – 1,399 –
Long-term incentive4,5 – – – – 1,199 904 1,199 904
Total variable pay 349 – 705 – 1,544 904 2,598 904
Other remuneration 7
– – – – – 2 – 2
Buy out 1
4,231 – – – – – 4,231 –
Total remuneration 5,523 – 2,343 1,477 2,516 3,604 10,382 5,081
Less: Performance adjustment – – – – – – – –
Total remuneration less buy-outs and
performance adjustment 1,292 – 2,343 1,477 2,516 3,604 6,151 5,081

1 Charlie Nunn succeeded Sir António Horta-Osório as Group Chief Executive on the 16 of August 2021. He was granted cash of £369,703 and deferred share awards over 8,301,708 shares to
replace unvested awards given up from his former employer, HSBC, as described on page 110 and a lost opportunity bonus award for 2020. The value of the lost opportunity bonus award
was £1,316.564 calculated by reference to his 2019 bonus, adjusted downward to reflect HSBC’s group bonus pool as disclosed in their 2020 Annual Report and a further 20 per cent pre-
agreed discount.
2 As previously disclosed William Chalmers was the Interim Group Chief Executive from 1 May 2021 until 15 August 2021 and his remuneration in the table above includes changes to his
remuneration for this period (pro-rated deputisation payment of £90,441 and Fixed Share Award of £64,595).
3 Sir António Horta-Osório retired as an Executive Director and Group Chief Executive on 30 April 2021. His remuneration details for 2021 are in respect of services provided as an Executive
Director. Details of Sir António Horta-Osório’s retirement terms are provided on page 107.
4 The 2019 Group Ownership Share (GOS) vesting (see page 107) at 41.8 per cent was confirmed by the Remuneration Committee at its meeting on 17 February 2022. The total number of
shares due to vest are 2,498,568 for Sir António Horta-Osório and the award was pro-rated to reflect Sir António Horta-Osório’s leaving date. The average share price between 1 October
2021 and 31 December 2021 47.993 pence has been used to indicate the value. The shares were awarded in 2019 based on a share price of 48.576 pence and as such no part of the reported
value is attributable to share price appreciation.
5 LTIP figures for 2020 have been adjusted to reflect the share price on the date of vesting (5 March 2021) 39.826 pence instead of the average price 32.623 pence reported in the 2020 report.
6 The fixed share award is part of fixed remuneration and is not subject to any performance conditions see page 114.
7 Other remuneration payments comprise income from all employee share plans, which arise through employer matching or discounting of employee purchases.

2021 pension and benefits (audited)

Charlie William Sir António
Pension/Benefits Nunn Chalmers Horta-Osório

Pension 63,920 121,626 60,400

Car or car allowance – 12,000 4,000
Flexible benefits payments 15,000 32,433 17,262
Private medical insurance 245 1,130 23,076
Legal fees 36,000 – 30,000
Tax preparation1 – – 30,000
Transportation (chauffeur) 2
– – 29,626
Subtotal for total benefits less pension 51,245 45,563 133,964

1 Tax preparation includes VAT.

2 Transportation benefits relate to the 2020/21 tax year.

Defined benefits pension arrangements (audited)

Sir António Horta-Osório has a conditional unfunded pension commitment. This was a partial buy-out of a pension forfeited on
joining from Santander Group. It is an Employer-Financed Retirement Benefits Scheme (EFRBS). The arrangement provides benefits
that are normally payable at retirement at age 65. The benefit in the EFRBS accrued during the six years following commencement of
employment, therefore ceasing to accrue as of 31 December 2016.

The EFRBS was subject to performance conditions and it provided for a percentage of his base salary or reference salary in the 12 months
before retirement or leaving. No additional benefit is due in the event of early retirement. The rate of pension accrued in each year
depended on share price conditions being met. In March 2019, António asked that his defined benefit pension be based on a percentage
of his pensionable salary in 2014. The total pension due is now fixed at 6 per cent of his 2014 reference salary of £1,220,000, or £73,200.

There are no other Executive Directors with defined benefit pension entitlements.
 Lloyds Banking Group Annual Report and Accounts 2021 105

Our 2021 balanced scorecard

For 2021, we significantly reduced the As set out in the scorecard assessment The Committee reviewed these outcomes
number of measures and rebalanced table below, the Operating Cost measure in the context of a number of internal and
the scorecard to ensure there is a clear has missed threshold predominantly as a external considerations to determine
weighting between financial and non- result of the additional expense incurred whether it should exercise its discretion
financial measures while appropriately for the improved Group Performance Share to adjust the outcome and determined
capturing ESG and customer dimensions. pool on the back of higher than anticipated that the 2021 scorecard outcome
Underlying Profit in 2021. However, strong appropriately rewards the Executive
Our simplified balanced scorecard performance against the other financial Directors for their performance within the
provides transparency on how our and ESG measures have resulted in an context of overall stakeholder experience.
performance directly aligns with overall outcome of 62.8 per cent.
remuneration outcomes for 2021 GPS
and 2022 LTSP awards.

Group balanced scorecard

Block Measure Weighting Performance range Actual Outcome Weighted

outcome
25% 50% 75% 100%

Profit after Tax 20% £2,269m £2,552m £2,836m £3,120m £5,885m 100% 20.0%
Financial (50%)

Governance
ROTE 20% 5% 5.6% 6.2% 6.9% 13.8% 100% 20.0%

Operating Costs (excl. remediation) 10% £7,630m1 £7,555m £7,480m £7,443m £7,630m 0% 0%
Risk

Reducing Operational Carbon Emissions 7.5% 15% 20% 30% 35% 34.5% 75% 5.6%
Non-financial (50%)

3.75% 37.0% 37.6% 38.2% 38.8% 37.7% 50% 1.9%

Increasing our gender and ethnic
representation in senior roles
3.75% 7.7% 8.3% 8.8% 9.4% 8.8% 75% 2.8%

Customer Dashboard 25% 60% 70% 80% 90% 79% 50% 12.5%

≥ 80 & ≥ 2 pts ≥82 & ≥ 2 pts 72+2 vs

≥ 78 & above norm-9 vs high
≥ 74 & ≥ 5 pts above high above high
Culture and Colleague Engagement 10% above norm
high performing
performing performing performing 0% 0%
norm norm
norm norm
Target

Total balanced scorecard outcome 62.8%

Key:

A Actual

Helping Britain Recover commitments

1 Threshold is £7,629.6m, figure rounded in table above.

Charlie Nunn – Group Chief Executive William Chalmers – Chief Financial Officer / Sir António Horta-Osório – Former Group
Interim Group Chief Executive Chief Executive

Maximum award1 £603,448 Maximum award £901,114 Maximum award1 £597,237

Group balanced Group balanced Group balanced

scorecard outcome 62.8% scorecard outcome 62.8% scorecard outcome 62.8%

Initial scorecard outcome £378,966 Initial scorecard outcome £565,899 Initial scorecard outcome £375,065

Committee discretion – Committee discretion £200,000 Committee discretion –

Group modifier2 (£30,317) Group modifier2 (£61,272) Group modifier2 (£30,006)

Annual GPS award/ £348,648 Annual GPS award/ £704,627 Annual GPS award/ £345,059
% of maximum 57.8% % of maximum 78.2% % of maximum 57.8%
Award is pro-rated for the period from 16 August 2021 Award for the Chief Financial Officer is combined Award is pro-rated 1 January 2021 to Sir António
to 31 December 2021 for acting as Interim Group Chief Executive and Horta-Osório’s retirement date on 30 April 2021.
Chief Financial Officer. An additional £200,000 was
awarded for performance as Interim Group Chief
Executive, whilst also the Chief Financial Officer.

1 Pro-rated maximum award.

2 Awards have been modified to reflect overall pool outcome applied to other colleagues.
106 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

Non-financial measures (50%) commentary

The scorecard that the Committee used in determining the annual bonus awards for the Executive Directors, along with the assessment
of performance against the scorecard, is detailed on page 105. The table below outlines the Committee’s assessment of the non-
financial elements of the scorecard.

Measure Commentary

Reducing operational carbon • We have achieved a 34.5 per cent reduction in emissions from our 2018/2019 baseline in 2021
emissions largely driven by a reduction in our business travel and commuting emissions.
• Offsetting this reduction is an increase in colleague homeworking emissions driven by the new
ways of working through the COVID-19 pandemic and a more carbon intensive energy mix
used in the National Grid to power homes.
Increasing our gender and ethnic • We have increased the female representation within our senior population by 0.7 percentage
representation in senior roles points since the end of 2020, moving from 37 per cent to 37.7 per cent.
• We have increased the senior Black, Asian and minority ethnic representation by
1.1 percentage points since the end of 2020 moving from 7.7 per cent to 8.8 per cent.
Customer Dashboard: • In 2021, 79 per cent of Group Customer Dashboard (GCD) metrics achieved target. Despite
Our assessment of how effectively a challenging operating environment, benchmarked measures evidenced that the Group
we are serving customers across all has further strengthened customer experience outcomes versus competitors, with average
brands, products and services 2021 rank position improved versus 2020 and exceeding target. Internal measures highlight
operational service challenges, as well as the ongoing strength of colleagues in supporting our
customers.
Culture and colleague • Engagement fell to 72 per cent in 2021, 2 points above the UK norm and 9 points below the
engagement: UK high performing norm, both of which are backward looking benchmarks for Company
Our employee engagement index performance 2018–2020 inclusive.
score absolute and performance • Despite lower engagement we have seen an increase in overall mood linked to better work life
versus UK norm and high balance, good teamwork and strong line manager capabilities.
performing norm

Personal performance and contribution

Individual factors considered when assessing the non-financial elements of the annual bonus scorecards

Executive Director Commentary

Charlie Nunn • Positive internal and external communications creating strong relationships with key
Group Chief Executive stakeholders and regulatory bodies
• Meaningful progress made on revitalising the Groups purpose, strategy and values
• Group financials remain positive with statutory profits reflecting strong performance
William Chalmers • Effective leadership as Interim Group Chief Executive prior to the appointment of Charlie
Chief Financial Officer Nunn, following interim accountabilities as Chief Operating Officer in Q1
• Cost discipline maintained, delivering operating costs in line with external market guidance of
£7.6 billion while maintaining market-leading efficiency
• Strong balance sheet management with CET1 ratio of 16.3 per cent, significantly ahead of
regulatory requirements
• Successful acquisition of Embark Group
Sir António Horta-Osório • Continued leadership throughout the COVID-19 pandemic, co-ordinating the Group’s wide-
Former Group Chief Executive ranging response to evolving customer and colleague needs
• Maintained prudent approach to growth and risk management
• Prior to his retirement, demonstrated clear communication and transfer of accountability to
Interim Group Chief Executive
 Lloyds Banking Group Annual Report and Accounts 2021 107

2019 Executive Group Ownership Share

In considering the vesting outcome for the Executive Group Ownership Share awards granted in 2019, the Committee discussed each
measure and considered that these awards were intended to reward long-term performance and strategic delivery. The Group’s economic
profit has improved despite the challenging income environment and there has been strong progress against customer measures which
align to the Group’s ambition to be the Best Bank for Customers. Overall, the 2019 plan vests at 41.8 per cent of maximum.

2019 Executive Group Ownership Share

Range

Block Measure Weighting Threshold Maximum Actual Weighted

vesting

Absolute Total Shareholder Return 30.0% 8% p.a 16% p.a (1.7%) p.a 0.0%
Financial (65%)

Economic Profit 25.0% £2,210m £3,315m £3,063m 19.3%

Cost: Income Ratio 10.0% 45.9% 43.4% 56.7% 0.0%

+5% vs +2% vs +2% vs

Employee Engagement Index 7.5% 0.0%
UK norm UK HP norm UK norm
Non-financial (35%)

Customer Satisfaction 10.0% 3rd 1st 1st 10.0%

FCA reportable complaints per ‘000 accounts 5.0% 2.89 2.61 2.53 5.0%

Governance
FOS Uphold Rate 5.0% =<29% =<25% 31% 0.0%

Digital NPS Score 7.5% 65.3 68.3 70.5 7.5%

Award (% maximum) vesting 41.8%

Payments for loss of office (audited) As the 2017 and 2018 Executive Group Ownership Share
Sir António Horta-Osório retired as Group Chief Executive awards have achieved their three-year performance period with
Officer and an Executive Director of Lloyds Banking Group plc on performance outcomes of 49.7 per cent and 33.75 per cent
30 April 2021. On 20 May 2021, António received a payment of respectively, any unvested awards will not be time pro-rated and
£200,809.49 in lieu of unused annual leave entitlement up to the will continue to vest at the normal vesting times and be released
retirement date. on their scheduled release dates.

Employees taking retirement are treated as ‘good leavers’ António was provided with a contribution of up to £25,000
under the Company’s Group Performance Share Plan (GPS Plan) (excluding VAT) towards legal fees incurred in connection with his
Rules. António declined a GPS award in 2019 and 2020 and has retirement from the Company. António will be provided with tax
no outstanding deferred GPS awards. He was eligible to be assistance from the Group’s preferred supplier for the tax years
considered for a GPS award for the 2021 performance period up 2021/2022 and 2022/23. Private medical cover was also provided
until his retirement date. He did not receive a Long Term Share until the end of 2021. As part of António’s buyout of retirement
Plan award for the 2020 performance year. benefits from his employment with Santander, the Group
agreed to an unfunded pension buy-out arrangement which was
António remained entitled to his Fixed Share Award, time determined based on the achievement of share price conditions
pro-rated to his retirement date. The award is paid in shares in over a six-year period. The arrangement provides benefits that
quarterly instalments and the final award of £83,477 was made are normally payable at retirement at age 65, in which case,
in shares in June 2021 and restricted over three years. The the amount would be an annual pension equal to 6 per cent of
statement published by the Group on its website on 30 April 2021 £1,220,000.
under s430(2B) of the Companies Act 2006 initially stated that the
value of the final award would be £88,846, based on an estimate No other payment for loss of office were made in 2021.
of the value of the award at that time.
Payments within the reporting year to past
As a ‘good leaver’ under the Executive Group Ownership Plan
Rules (Executive GOS), António’s outstanding 2019 and 2020
Directors (audited)
There were no payments made to past Directors in 2021.
Executive GOS awards will be time pro-rated to his retirement date
(2019 becomes 5,977,436 shares and 2020 becomes 3,680,612
shares). The awards remain subject to the performance measures External appointments
which apply to the relevant awards and will continue to vest at Sir António Horta-Osório – During the year ended 31 December
the normal vesting dates and be released on their scheduled 2021, the former Group Chief Executive served as a Non-
release dates, subject to the relevant terms (including post-vesting Executive Director of Exor, Fundacao Champalimaud, Sociedade
retention periods, malus and, where applicable, clawback and to Francisco Manuel dos Santos and Stichting INPAR Management/
deductions for national insurance and income tax). Enable. António is entitled to retain the fees, which were £107,978
in total.

No other Executive Director served as a Non-Executive Director

in 2021.
108 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

Relative importance 1 2021: Ordinary dividend in respect of the financial

of spend on pay Dividend and share buyback 1
£m
year ended 31 December 2021, partly paid in 2021
The graphs illustrate the total and partly to be paid in 2022 and intended share
remuneration of all Group employees 2021 3,420 buyback. 2020: Ordinary dividend in respect of
the financial year ended 31 December 2020, paid
compared with returns of capital to during 2021 and the maximum allowable under PRA
shareholders in the form of dividends 2020 404
guidelines at the time.
and share buyback. 2 Performance-based compensation includes expense
for the following plans: Group Performance Share
Salaries and performance-based (2021: £301m, 2020: £81.3m), LTSP and Executive
compensation 2 £m Group Ownership Share (2021: £22.8m, 2020:
2021 2% 2,740 £23.3m), Executive Share Awards (2021: £0.2m,
2020: £0.4m) and LDC Assets under Management
Plan (2021: £12m, 2020: £12m). The expenses for
2020 2,685
Group Performance Share in 2020 relate to prior year
deferrals. For the 2021 performance year, the face
value of awards was £399m for Group Performance
Share and £50.8m for the Long Term Share Plan.

Comparison of returns to shareholders and Group Chief Executive total remuneration

The chart below shows the historical total shareholder return (TSR) of Lloyds Banking Group plc compared with the FTSE 100 as
required by the regulations. The FTSE 100 index has been chosen as it is a widely recognised equity index of which Lloyds Banking
Group plc has been a constituent throughout this period.

TSR indices – Lloyds Banking Group and FTSE 100

Historical TSR Performance

Growth in the value of a hypothetical £100 holding since 31st December 2011 (to 31st December 2021)
Value of £100 invested on 31 December 2011

350

300

250

200

150

100

50

0
Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Dec 2019 Dec 2020 Dec 2021
Lloyds Banking Group FTSE 100 index

CEO 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

GCE single figure Sir António Horta-Osório 1

3,398 7,475 11,540 8,704 5,791 6,434 6,544 4,424 3,604 2,516
of remuneration
Charlie Nunn2 – – – – – – – – – 5,523
£000
William Chalmers3 – – – – – – – – – 819
Annual bonus/ Sir António Horta-
GPS payout Osório1,4 62% 71% 54% 57% 77% 77% 67.60% – – 57.8%
(% of maximum
Charlie Nunn 2
– – – – – – – – – 57.8%
opportunity)
William Chalmers 3
– – – – – – – – – 78.2%
Long-term Sir António Horta-Osório1 0% 54% 97% 94.18% 55% 66.30% 68.70% 49.70% 33.75% 41.8%
incentive vesting
Charlie Nunn 2
– – – – – – – – – –
(% of maximum
opportunity) William Chalmers 3
– – – – – – – – – –
TSR component Sir António Horta-Osório 1
0% 25.30% 30% 30% 0% 0% 0% 0% 0% 0%
vesting
Charlie Nunn2 – – – – – – – – – –
(% of maximum)
William Chalmers 3
– – – – – – – – – –

1 Sir António Horta-Osório retired as an Executive Director and Group Chief Executive on 30 April 2021. His remuneration details for 2021 are in respect of this period.
2 Charlie Nunn succeeded Sir António Horta-Osório as Group Chief Executive in August 2021 and the remuneration included in the table above is in respect of this period and
includes a buy-out of £ 4,231m.
3 William Chalmers was the Interim Group Chief Executive from 1 May 2021 until 15 August 2021, remuneration in the table above is for this period.
4 Sir António Horta-Osório declined to take a bonus in 2011 and independently requested that he be withdrawn from consideration for a Group Performance Share award in
2019 and 2020. There were no GPS awards for 2020 performance.
 Lloyds Banking Group Annual Report and Accounts 2021 109

Single total figure of remuneration for Chair and Non-Executive Directors (audited)
Fees (£000) Benefits (£000)4 Total (£000)
2021 2020 2021 2020 2021 2020

Chair and Non–Executive Directors

Robin Budenberg 618 45 – – 618 45
Alan Dickinson 397 347 1 1 398 348
Sarah Legg 212 166 2 – 214 166
Lord Lupton 287 313 1 4 288 317
Amanda Mackenzie 164 165 – – 164 165
Harmeen Mehta 1
16 – – – 16 –
Nick Prettejohn2 363 508 1 8 364 516
Stuart Sinclair 231 254 – – 231 254
Sara Weller 3
76 207 1 3 77 210
Catherine Woods 232 135 5 – 237 135

1 Harmeen Mehta was appointed on 1 November 2021.

2 Nick Prettejohn retired 30 September 2021.
3 Sara Weller retired 20 May 2021.
4 Other benefits relates to reimbursement for expenses incurred in the course of duties. Non-Executive Directors do not receive variable pay.

Governance
Directors’ share interests and share awards
Directors’ interests (audited)
Number of shares Number of options Total shareholding1 Value
Expected
Unvested Unvested value at
subject to Unvested subject to Totals at 31 December
Owned continued subject to continued Vested 31 December 2021
outright1 employment performance5 employment unexercised 2021 (£000s)4

Executive Directors
Charlie Nunn 921,956 – – 7,444,787 – 8,366,743(3) 4,004
William Chalmers 6
4,926,640 79,116 6,474,531 749,579 – 12,229,866 (3)
4,674
Sir António Horta-Osório 2,5,6
24,366,753 (2)
– 13,059,887 (5)
– – 37,426,640 15,367
Non-Executive Directors
Robin Budenberg 1,000,000 – – – – 1,000,000 n/a
Alan Dickinson 200,000 – – – – 200,000 n/a
Sarah Legg 200,000 – – – – 200,000 n/a
Lord Lupton 2,250,000 – – – – 2,250,000 n/a
Amanda Mackenzie 63,567 – – – – 63,567 n/a
Harmeen Mehta 7
– – – – – – n/a
Nick Prettejohn 8
69,280 – – – – 69,280 n/a
Stuart Sinclair 362,664 – – – – 362,664 n/a
Sara Weller 9
372,988 – – – – 372,988 n/a
Catherine Woods 102,673 – – – – 102,673 n/a

1 Including holdings of any Person Closely Associated.

2 Sir António Horta-Osório retired as Group Chief Executive and an Executive Director with effect from 30 April 2021. The number of shares owned outright are as of 30 April
2021. The number of shares in respect of any GOS Awards (in line with the applicable Remuneration Policy) due to vest, have been reduced to reflect the period from the
start of the performance period to 30 April 2021. Any shares delivered post António’s cessation date have been excluded. This includes shares purchased under the Share
Incentive Plan delivered shortly following termination at the same time that other SIP participants received their April partnership shares and the Q2 2021 Fixed Share Award
for the period 1 April 2021 to 30 April 2021 delivered at the same time as other participants in June 2021.
3 There has been no change in shareholdings from 31 December 2021 to 23 February 2022.
4 Expected values are based on the LBG closing share price of 47.86 pence on 31 December 2021.
5 For awards granted under the 2017 and 2018 Group Ownership Share (GOS) Plans where the three-year performance period has completed and the shares are unvested, the
actual outcome has been applied to reduce the number of shares and to calculate the expected value. The outcomes applied were 2017 GOS 49.7 per cent and 2018 GOS
33.75 per cent.
6 For awards granted under the 2020 GOS Plan and the 2021 Long Term Share Plan where the three-year performance period has not completed, 50 per cent has been applied
to calculate the expected value of the 2020 GOS plan and 100 per cent applied to calculate the expected value of the LTSP award in line with the applicable Remuneration
Policy.
7 Harmeen Mehta was appointed 1 November 2021.
8 Nick Prettejohn retired 30 September 2021; the number of shares shown is as of 30 September 2021. In addition, Nick Prettejohn held 400 (6.475 per cent) preference shares
at 1 January 2021 and 30 September 2021.
9 Sara Weller retired 20 May 2021; the number of shares shown is as of 20 May 2021.
10 Directors are not permitted to enter into any hedging arrangements in relation to share awards. No Director uses share holding as collateral.
110 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

Outstanding share plan interests (audited)

Vested/ At Exercise periods
At 1 January Granted/ Dividends released/ 31 December Exercise
2021 awarded awarded exercised Lapsed 2021 price From To Note

Charlie Nunn
Share Buy-Out 856,921 856,921 1,2
859,340 859,340 16/03/2022 15/03/2027 1
1,247,548 1,247,548 15/03/2023 14/03/2028 1
1,368,990 1,368,990 12/03/2024 11/03/2029 1
1,368,990 1,368,990 11/03/2025 10/03/2030 1

1,369,012 1,369,012 11/03/2026 10/03/2031 1

891,217 891,217 11/03/2027 10/03/2032 1

339,690 339,690 11/03/2028 10/03/2033 1
William Chalmers
GOS 2020–2022 4,927,191 4,927,191 3
LTSP 2021–2023 1,547,340 1,547,340 4
Deferred GPS
awarded in 2020 237,342 158,226 79,116 5
Share Buy-Out 1,124,627 1,124,627 28/01/2021 27/01/2026 6
686,085 686,085 28/01/2022 27/01/2027 6
2020 Sharesave 46,317 46,317 24.25p 01/01/2024 30/06/2024
2021 Sharesave 17,177 17,177 39.40p 01/01/2025 30/06/2025
Sir António Horta-Osório
GOS 2017–2019 2,114,708 85,082 528,677 1,586,031 3,7,8
GOS 2018–2020 6,725,221 453,952 4,455,461 1,815,808 3,7
GOS 2019–2021 7,685,276 1,707,840 5,977,436 3,9
GOS 2020–2022 8,281,379 4,600,767 3,680,612 3,9
Deferred GPS
awarded in 2019 373,566 373,566 10
2017 Sharesave 21,728 21,728 51.03p 01/01/2021 30/06/2021 11
2019 Sharesave 17,336 10,594 6,742 39.87p 01/05/2021 30/10/2021 12
2020 Sharesave 29,690 8,247 21,443 24.25p 01/05/2021 30/10/2021 12

1 Charlie Nunn joined the Group on 16 August 2021 as Group Chief Executive and Executive Director. He was granted deferred share awards to replace, like for like, unvested
share and cash awards from his previous employer, HSBC, forfeited as a result of joining the Group and lost opportunity bonus for 2020. Deferred Share awards were made
under the Lloyds Banking Group Deferred Bonus Plan over 8,301,708 shares. This includes deferred cash amounts totalling £1,430,717 that Charlie forfeited from HSBC and
voluntarily opted to take in shares. The number of Shares over which the deferred share awards were granted was calculated using the five-day average mid-market closing
prices of HSBC and the Group up to his start date of 16 August 2021. The awards are subject to vesting schedules and retention periods that match those of the awards
forfeited. As the awards are buy-outs they are not subject to performance conditions or time pro-rating in good leaver circumstances. The awards are subject to malus and
clawback on the same terms as Deferred GPS Awards, and in addition are subject to clawback in the event of resignation within two years of grant. The value of the awards is
not pensionable. The awards were granted in accordance with the regulatory requirements for buy-outs.
2 As a number of awards would have vested at the time Charlie Nunn joined the Group, the shares awarded in September 2021 vested immediately on grant. The closing market
price of the Group’s ordinary shares on that date was 43.9775 pence. After the settlement of income tax and National Insurance, 454,168 shares were released to Charlie Nunn
of which 297,772 continue to be subject to a retention period of 12 months.
3 All GOS awards have a three-year performance period ending 31 December. Awards were made in the form of conditional rights to free shares.
4 LTSP awards (in the form of conditional share options) in 2021 were made over shares with a value of 75 per cent of salary for William Chalmers (1,547,340 shares with a face
value of £608,128). Vesting is subject to underpin thresholds applicable for the first three years from grant as detailed on page 132 of the 2020 Directors’ remuneration report.
Each year the Remuneration Committee will monitor the Group’s progress in relation to the underpins. No awards were made to Sir António Horta-Osório and Charlie Nunn.
The share price used to calculate the face value was the average price over the five days prior to grant (25 February to 3 March 2021), which was 39.3015 pence. The underpins
for this award are set out on page 115.
5 The second tranche of the 2019 GPS Award deferred shares vested on 5 March 2021. The closing market price of the Group’s ordinary shares on that date was 40.07 pence.
Shares vested are subject to a further one-year holding period. Sir António Horta-Osório waived his 2019 GPS.
6 When William Chalmers joined the Group on 3 June 2019, he was granted deferred share awards, to replace unvested awards from his former employer, Morgan Stanley.
Options vested on 27 January 2021 and William Chalmers exercised on 4 March 2021. William Chalmers retained all the shares apart from 528,826 shares which were sold at
40.235 pence to meet income tax and National Insurance contributions. 595,801 shares are subject to a 12-month holding period from the date of vesting on 27 January 2021.
7 The second tranche of the 2017 GOS awards and the first tranche of the 2018 GOS award vested on 5 March 2021. The closing market price of the Group’s ordinary shares on
that date was 40.07 pence. Shares vested are subject to a further holding period.
8 2017 GOS award was eligible to receive an amount equal in value to any dividends paid during the performance period. Dividend equivalents have been paid based on the
number of shares vested and have been paid in shares. The dividend equivalent shares were awarded and released on 5 March 2021. The closing market price of the Group’s
ordinary shares on that date was 40.07 pence. The dividend equivalent shares are not subject to any holding period.
9 The number of shares in respect of the 2019 and 2020 GOS Awards for Sir António Horta-Osório have been reduced to reflect the period from the start of the Performance
Period to his date of leaving (30 April 2021) in accordance with the appropriate plan rules.
10 The final tranche of 2018 GPS award vested on 5 March 2021. The closing market price of the Group’s ordinary shares on that date was 40.07 pence. 50 per cent of the final
tranche is subject to a one year holding period.
11 2017 Sharesave options were not exercised due to the prevailing share price and lapsed on 2 July 2021.
12 2019 and 2020 Sharesave options exercised on 14 October 2021. The closing market price of the Group’s ordinary shares on that date was 48.4425 pence. The lapsed figures
represent options Sir António Horta-Osório was not entitled to due to leaving the Group in April.
 Lloyds Banking Group Annual Report and Accounts 2021 111

Shareholding policy line with regulatory requirements and The post-employment requirement will be
Under our Shareholding Policy applicable ensure that a substantial proportion of maintained through self-certification, with
to 2021, the minimum shareholding variable reward for Executive Directors the Committee keeping this approach
requirements are as follows: 350 per and other senior employees takes the under review.
cent of base salary for the Group Chief form of shares deferred and held over
Executive and 250 per cent of base salary a period of up to eight years. These We have reviewed our current
for other Executive Directors. structures ensure Executive Directors shareholding policy and subject to
continue to meet our shareholding shareholder approval at the AGM in
Executive Directors will have three years requirements for a minimum of two years 2023, the intention will be to align
from appointment in which to achieve after leaving the Group. the shareholding policy for Executive
the current Policy. In the event that Directors with other members of Senior
exceptional individual circumstances exist Post-employment shareholding Management and increase the timeframe
resulting in an Executive not being able to by which the shareholding requirement
comply with the Policy, the Remuneration requirement should be achieved from three to five
Committee will consider whether an From 1 January 2022, the current Group years from their commencement date.
exception should apply. Chief Executive and Chief Financial Officer
will be contractually bound to a post- None of those who were Directors at the
The Group did not operate a formal post- employment shareholding requirement end of the year had any other interest in
employment shareholding policy in 2021. of two years at a level equal to the the capital of Lloyds Banking Group plc
Existing reward structures and the Long lower of the shareholding requirements or its subsidiaries.
Term Share Plan have been designed in immediately prior to departure or the
actual shareholding on departure.

Shareholding requirement
Charlie Nunn
350%

Governance
Actual shareholding 1

36%

Shareholding requirement 2
William Chalmers
250%

Actual shareholding 1

270%

Shareholding requirement 3
Sir António Horta- 350%
Osório
Actual shareholding 1

837%

1 Calculated using the average share price for the period 1 January 2021 to 31 December 2021 (44.46 pence). Includes ordinary shares acquired through the vesting of
the deferred Group Performance Share plan, Fixed Share Awards as the shares have no performance conditions; American Deposit Receipts (ADRs) with each one ADR
equating to four shares, Executive Share Awards which have vested but have not been exercised; shares held in the Share Incentive Plan (SIP) Trust, i.e. Free, Partnership,
Matching and Dividend shares which are no longer subject to forfeiture, as defined in the SIP Rules. Shares held by Person Closely Associated, as defined by the
Companies Act, but broadly meaning spouse or partner and children, may also be included.
2 The Chief Financial Officer currently holds 270 per cent of his salary in shares and had until 2 June 2022 to achieve the requirement under the Policy applicable in 2021.
3 At the time of his departure in April 2021 the former Group Chief Executive, Sir António Horta-Osório, held 837 per cent of his salary in shares.

Chair and Non-Executive Director fees in 2021

The annual fee for the Chair was increased by 1 per cent to £624,400 and there will be a 1 per cent increase in Non-Executive Directors
fees for 2022.

2022 2021

Basic Non-Executive Director fee £82,000 £81,200

Deputy Chair £107,000 £106,000
Senior Independent Director £64,200 £63,600
Audit Committee Chair £75,000 £74,300
Remuneration Committee Chair £75,000 £74,300
Risk Committee Chair £75,000 £74,300
Responsible Business Committee Chair £42,800 £42,400
IT Forum Chair £42,800 £42,400
Audit Committee Member £34,300 £34,000
Remuneration Committee Member £34,300 £34,000
Risk Committee Member £34,300 £34,000
Responsible Business Committee Member £16,100 £15,900
Nomination and Governance Committee Member £16,100 £15,900

Non-Executive Directors may receive more than one of the above fees.
112 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

Percentage change in remuneration levels

The table below sets out the change in the Directors’ base salary/fees, taxable benefits and annual bonus compared with the change
in our UK-based colleagues’ pay. Lloyds Banking Group plc is not an employing entity, and therefore the disclosure below is made on a
voluntary basis to compare any change with all employees of the wider Group based in the UK. This population has been chosen as the
majority of our workforce are based in the UK and is considered to be the most appropriate group of employees. The same population
is used for the purposes of the Chief Executive Officer pay ratio disclosure on page 113 of the report.
% change in base % change in % change in
salary/fees GPS benefits

2019 to 2020 2020 to 2021 2019 to 2020 2020 to 20213 2019 to 2020 2020 to 2021

All employees 1,2

4 4 (100) N/A (32) 1
Executive Directors
Charlie Nunn5 N/A N/A N/A N/A N/A N/A
William Chalmers4 2 12 (100) N/A (1) 2

Sir António Horta-Osório5 2 0 NA N/A (4) 11

Non-Executive Directors 6

Robin Budenberg N/A 243 N/A N/A N/A N/A

Alan Dickinson 45 14 N/A N/A N/A N/A
Sarah Legg 131 28 N/A N/A N/A N/A
Lord Lupton 0 (8) N/A N/A N/A N/A
Amanda Mackenzie 6 (1) N/A N/A N/A N/A
Harmeen Mehta N/A N/A N/A N/A N/A N/A
Nick Prettejohn 8 (5) N/A N/A N/A N/A
Stuart Sinclair 21 (9) N/A N/A N/A N/A
Sara Weller 2 (12) N/A N/A N/A N/A
Catherine Woods N/A 43 N/A N/A N/A N/A

1 Lloyds Banking Group is not a contracting entity but considers this population to be appropriate for purposes of an ‘All employees’ calculation.
2 In October 2019, the company car scheme closed and car allowances were consolidated into salary for c20,000 colleagues, reducing the average amount of benefits received.
3 No Group Performance Share (bonus) was paid for 2020 performance.
4 William Chalmers was the Interim Group Chief Executive from May to August 2021 and received a deputisation payment for this period.
5 Sir António Horta-Osório retired 30 April 2021, figures are annualised based on the single total figure table. Charlie Nunn became the Group Chief Executive in August 2021
and therefore year on year changes do not apply.
6 Non-Executive Directors may change Committee Membership or role during the year, resulting in large year-on-year percentage changes.

Gender pay We still have a higher proportion

Mean pay gap
While we have further reduced the mean of women in more junior levels and %
pay gap this year to 29.9 per cent from fewer women in more senior roles.
Further information is available at 2021 29.9%
32.8 per cent in 2017 the pay gaps are
still larger than we would like. www.lloydsbankinggroup.com/assets/
pdfs/who-we-are/responsible-business/ 2020 30.5%

The reduction in our pay gap is due to an downloads/lbg-gender-pay-gap-

improvement in gender representation report-2020-21.pdf Mean bonus gap
across our business, with an increase in %
the proportion of female colleagues in 1 Bonus data cannot be compared like-for-like with
20211
senior roles. However, the biggest driver the equivalent data for last year. This is because
of our pay gap continues to be the shape no bonuses were paid in 2020, except for deferred
payments from previous years. 2020 62.5%
of our workforce.

Ethnicity pay With this in mind we are taking a number

Mean pay gap
While there is currently no legal of steps including having Black, Asian, %
requirement to publish ethnicity pay and minority ethnic candidates on all
shortlists to increase diversity in senior 2021 5.3%
data in the UK, we are publishing this
data not only because it is the right thing recruitment. Further information is
available at www.lloydsbankinggroup. 2020 6.8%
to do, but it also holds us to account for
the goals we have set. com/assets/pdfs/who-we-are/
responsible-business/downloads/lbg- Mean bonus gap
Since our last report (2019/20) was ethnicity-pay-gap-report-2020-21.pdf %
released we have seen our pay gap close 20211
slightly. This improvement is welcomed. 1 Bonus data cannot be compared like-for-like with
However, we know that the pace of the equivalent data for last year. This is because
no bonuses were paid in 2020, except for deferred 2020 26.3%
change is slower than we’d like. payments from previous years.
 Lloyds Banking Group Annual Report and Accounts 2021 113

Chief Executive Officer pay ratio

The Remuneration Committee views pay ratios as a useful reference point to inform policy setting, but also takes into consideration
a number of other factors. The table below shows the ratios of the Group Chief Executive’s total remuneration to the remuneration of
colleagues since 2017. The change in the pay ratios for 2021 is explained in more detail below.

The median ratio calculated for all three individuals undertaking the role of Group Chief Executive increased by 137 per cent year-
on-year. This increase can be attributed to the one-off buy out awards granted to Charlie Nunn, an increase in the vesting LTIP and
the payment of Group Performance Awards (Annual Bonus), which were not awarded for 2020. Excluding the one-off buy-out awards
granted to Charlie Nunn, the CEO pay ratio is 117:1. Whilst this is a 23 per cent increase on 2020 when no bonuses were awarded, it
reflects a continued improvement on prior years.
Total compensation Fixed pay
P25 P50 P75 P25 P50 P75
Year Methodology (Lower Quartile) (Median) (Upper Quartile) (Lower Quartile) (Median) (Upper Quartile)

2021 A 316:1 225:1 120:1 93:1 66:1 38:1

2020 A 132:1 95:1 54:1 103:1 75:1 42:1
2019 A 179:1 128:1 71:1 114:1 82:1 47:1
2018 A 237:1 169:1 93:1 113:1 81:1 48:1
2017 A 245:1 177:1 97:1 113:1 82:1 48:1
Y-o-Y 137% (11%)
(2020 v 2021)
2021 A – Excluding 165:1 117:1 63:1 93:1 66:1 38:1
buy-out

Governance
Notes to the table:
• The 2021 total remuneration for the colleagues identified at P25, P50 and P75 are as follows: £28,005, £ 39,396, £ 73,629.
• The 2021 base salary for the colleagues identified at P25, P50 and P75 are as follows: £22,961, £30,095, £55,064.
• The P25, P50 and P75 colleagues were determined on 31 December 2021 based on calculating total remuneration for all UK
employees for the 2021 financial year. Payroll data from 1 January 2021 to 31 December 2021.
• Colleague total remuneration has been calculated in line with the single total figure of remuneration. The single total figure of
remuneration has been calculated for 60,317 UK colleagues within the Group for a full year including full-time equivalent base
pay, vesting Group Ownership Share awards (for eligible colleagues), core benefits, pension, overtime and shift payments, travel/
relocation payments (for eligible colleagues) and private medical benefit.
• The average share price between 1 October 2021 and 31 December 2021 47.993 pence has been used to indicate the value of vesting
Group Ownership Share awards.
• The colleague identified at P50 did not receive a separate car benefit and does not participate in the long term incentive plan. As a
result, the ratio does not provide a direct comparison to the total remuneration of the Group Chief Executive.
• Due to operational constraints, the calculation of the colleague Pension Input Figure excludes inflationary adjustments for those on
the defined benefit scheme. The omission of this factor does not materially affect the outcome of the ratio and/or distort the validity
of the valuation.
• All other data has been calculated in line with the methodology for the single total figure of remuneration for the Group Chief Executive.
Our ratios have been calculated using Methodology option A on the basis that it provided the most accurate means of identifying the
median, lower and upper quartile colleagues. The ratio has been calculated taking into account the pay and benefits of over 60,000 UK
employees, other than the three individuals performing the role of Group Chief Executive.

The Group welcomed Charlie Nunn as Group Chief Executive in August 2021, taking over from Sir António Horta-Osório who retired
from the Group on 30 April 2021. William Chalmers was in role for the interim period from 1 May 2021 to 15 August 2021. As a result of
these changes during the year, the CEO ratio reporting is more complicated and we have therefore provided additional information to
support the mandatory disclosures.

The change in total remuneration ratios since 2017 is largely driven by the more volatile nature of variable pay for the CEO. The
reduction in 2020 can be attributed to the decision not to make awards under the Group Performance Share Plan; reduced
performance in the vesting of the 2018 Group Ownership plan compared to 2017 and the reduction in the former Group Chief
Executive’s pension allowance from 33 per cent to 15 per cent of salary.

For the majority of colleagues, year-on-year changes in remuneration are principally driven by pay increases and the impacts of
Group performance and collective adjustment which has resulted in a reduction in the bonus pool. The Group has a commitment to
pay progression and a continued focus on ensuring higher pay awards for colleagues who are lower paid, or paid lower within their
pay range. We are committed to reducing the pay gap between executives and wider colleagues and continue to remain focused on
addressing the gap from the bottom up and not just from the top down.

The Committee is thoughtful of the volatility in pay ratios due to variable reward outcomes. Although the pay ratio is used as a useful
reference point to inform policy-setting, the Committee takes into account a number of other factors to assess colleague pay progression.
114 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

Implementation of the policy in 2022

The 2020 Directors’ Remuneration Policy was approved at the 2021 AGM in May. The Group proposes to operate the policy in the
following way for 2022.

Base salary
The Group has proposed a total pay Salary increases for the Group Chief Salaries will therefore be as follows:
budget of 3.6 per cent. The approach Executive (GCE) and Chief Financial Group Chief Executive: £1,136,250
focuses on lower paid colleagues and Officer (CFO) are set below the budget for Chief Financial Officer: £818,945
colleagues lower in their pay range. the wider colleague population at 1 per
cent.

Fixed Share Award

Awards remain unchanged from 2022 as Shares will be released in equal tranches
follows: over three years. (See page 118 for further
Group Chief Executive: £1,050,000 details).
Chief Financial Officer: £504,000

Pension
Pension allowances for all Executive Over 50,000 colleagues participate in In addition to the DC arrangement,
Directors are set at 15 per cent of base the Group’s Defined Contribution (DC) the Group currently has almost 12,000
salary. Any new Executive Director Pension scheme where the maximum active members in defined benefit plans,
appointments in 2022 will also attract a opportunity for the workforce is 15 per with the effective cost of employer
maximum allowance of 15 per cent of base cent of base salary. Executive Directors contributions into these arrangements
salary. employer pension contributions are being 38 per cent of salary.
therefore aligned with those available to
the majority of the workforce.

Benefits
Benefits remain unchanged from 2021. This can be used to select benefits Other benefits include transportation and
Executive Directors receive a flexible including life assurance and critical illness private medical cover. The Chief Financial
benefit allowance in line with colleagues, cover. Officer also receives a car allowance.
(4 per cent of base salary).

Group Performance Share (Bonus)

The performance measures for Individual awards as a percentage of in combination with any award under
determining any individual 2022 Group maximum will directly correlate to the the Long Term Share Plan, there will be a
Performance Share awards for Executive overall performance assessment outcome. deferral of variable remuneration in line
Directors are outlined in the 2022 with applicable regulatory requirements
balanced scorecard on page 116. For the 2022 performance year, any Group (currently requiring a deferral of 60 per
Performance Share opportunity will be cent of variable remuneration for
Individual maximum opportunities for awarded in March 2023 in a combination Executive Directors).
Executive Directors remain unchanged of cash (up to 50 per cent) and shares.
from 2021 at 140 per cent of base salary for In accordance with the Policy, deferral
the Group Chief Executive and 100 per and vesting of any Group Performance
cent for other Executive Directors. Share awards will be structured so that
 Lloyds Banking Group Annual Report and Accounts 2021 115

Long Term Share Plan

It is an important feature of the LTSP In deciding the award size, the Committee Awards will not be subject to further
that performance is assessed and considered the balanced scorecard, performance conditions however
appropriately recognised upfront in the Group’s share price, as well as the vesting will be subject to three underpin
award size as there are no performance following four questions: thresholds applicable for the first
conditions that apply after the award • Has the bank lived up to its ambition to three years from grant. Each year the
is granted (only underpins). This is not be the Best Bank for Customers? Remuneration Committee will monitor
however a mechanical outturn, as with • Do the Group’s financial results and the Group’s progress in relation to the
GPS, the Remuneration Committee may capital position adequately reflect risk, underpins. An assessment will be made
exercise its judgement. conduct and any other non-financial at the end of the three year period to
considerations, including ESG? determine whether the underpins have
Pre-grant test • Has the Group made meaningful been successfully maintained over the
The decision to award Long Term Share progress in supporting the UK’s three years and to what extent the LTSP
Plan awards for 2022 is based on the transition to net zero? award should vest. The Remuneration
performance assessment from the 2021 • Has the Group suffered a serious Committee will also retain the right
balanced scorecard provided on page 105. conduct event or has severe reputational to consider other factors and apply
damage arisen from the Group not living discretion prior to making a decision on
To ensure that the Group Chief Executive its values? vesting.
and Chief Financial Officer are aligned
to the long-term success of the Group The Committee concluded that the Pre-vest test
and motivated to deliver the next phase Group’s strong capital position, positive In conjunction with the assessment of
of the Group’s strategy and sustainable reputation through 2021 and the support performance against the underpins, the
returns, the Remuneration Committee for customers and businesses during 2021 Remuneration Committee will consider
has awarded 2022 Long Term Share Plan supported the making of awards. the four core questions above to satisfy
awards of 150 per cent of salary to the itself that the performance considered in
Group Chief Executive and the Chief Underpins the pre-grant test has been sustainable.

Governance
Financial Officer to reflect the Group’s The underpins that will apply to the 2022 The Remuneration Committee will retain
performance in 2021 and other factors LTSP awards are: the right to consider other factors and
taken into account in the ‘pre-grant test’. • CET 1 ratio – Group CET1 ratio above apply general discretion in making a
the guided management target each decision on the vesting of awards. This
The normal range for awards for Executive year, including all regulatory buffers approach helps to avoid any potential
Directors is 125 per cent to 150 per • ROTE – Group ROTE exceeds the unintended outcomes that might
cent of salary. The level of award for the average for UK peer banks over the arise from the application of formulaic
Group Chief Executive acknowledges three years performance criteria in the underpins
that prior to joining, Charlie Nunn agreed • Ordinary Dividend – Increased ordinary and ensure that there is a fair outcome.
to voluntarily reduce the maximum dividend payments over the plan period The Committee will explain its reasons for
opportunity from 200 per cent under (subject to any further sector-wide applying discretion in either direction, or
the approved Directors’ Remuneration regulatory constraints). for not doing so.
Policy to 150 per cent. Consistent with the
awards for 2020 performance granted The peer comparator group for the ROTE
in March 2021, these 2022 awards are underpin is set at Barclays Group PLC,
subject to underpins for the first three HSBC Holdings PLC, Natwest Group PLC,
years which align the vesting outcomes to Santander UK PLC and Virgin Money UK
longer-term shareholder experience and PLC. ROTE will be measured on the new
are deferred for up to seven years. basis adopted from 2021 and will take into
account adjustments (as appropriate) for
methodology differences between peers
and any other factors the Remuneration
Committee considers should reasonably be
reflected, including relative under or out-
performance or change in business mix.

Balanced scorecard outcomes and LTSP award range

Scorecard performance outcome 0%—50% 50%—100%

All LTSP grant (up to % of base salary) 0%—125% 125%—150%1

1 Awards above 150 per cent and up to 200 per cent in line with Policy maximum reserved for exceptional circumstance or exceptional performance for all eligible
colleagues other than Charlie Nunn who agreed to cap his maximum award at 150 per cent of salary.
116 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

2022 Group Performance Scorecard

The performance measures for Quantitative financial measures make When assessing performance, the
determining any 2022 Group Performance up 50 per cent of the scorecard, with Committee can exercise its judgment to
Share Awards (GPS) and 2023 Long Term the remaining 50 per cent made up of determine the appropriate outcome. This
Share Plan (LTSP) awards for the Executive non-financial measures assessed by helps to avoid any potential unintended
Directors are shown in the table below. the Remuneration Committee using outcomes that might arise from the
quantitative inputs. When determining application of formulaic performance
The measures and targets are set annually the final outcome, the Remuneration criteria.
by the Remuneration Committee to reflect Committee may consider any personal
the strategic priorities of the Group and or business area objectives and whether
take into account both the annual financial there has been effective, consistent and
plan and operating plan against the proactive risk management and conduct
backdrop of the rapidly evolving external outcomes across all dimensions.
economic and societal landscape.

Measures and weightings Targets

Targets will be disclosed retrospectively

in the 2022 Annual Report alongside
Profit after tax 20% the level of performance achieved, as
the Remuneration Committee considers
such targets to be commercially
Financial (50%)

sensitive. However a target range has

been set in line with our operating plan
ROTE 20% and, where applicable, forward- looking
guidance.

Measures of financial and non-financial

Operating costs (excl. remediation and in-year GPS expense) 10% performance have been agreed by the
Remuneration Committee to evaluate
performance during 2022.
Risk

Customer
Our assessment of how effectively we are serving customers 25%
across all brands, products and services
Non-financial (50%)

Colleague
• Increasing our gender and ethnic representation in senior roles 7.5%
• Culture and colleague engagement – Our performance absolute 1 The sustainable financing and investment
and performance versus UK norm and high performing norm 7.5% criteria for the Group Balanced Scorecard
details the financing and investment activities
that are eligible for inclusion towards this
Climate measure. Further information is available at:
• Reducing our operational carbon emissions 5% www.lloydsbankinggroup.com/assets/pdfs/
• Sustainable financing and investment1 5% who-we-are/financing-a-green-future/objective-
framework.pdf

Performance Adjustment
Performance adjustment is determined • there is material failure of risk Awards are subject to clawback for a
by the Remuneration Committee and/ management at a Group, business area, period of up to seven years after the date
or Board Risk Committee and may result division and/or business unit level; of award which may be extended to 10
in a reduction of up to 100 per cent • the Committee determines that the years where there is an ongoing internal or
variable remuneration opportunity for financial results for a given year do regulatory investigation.
the relevant period. It can be applied not support the level of variable
on a collective or individual basis. When remuneration awarded; and/or The application of clawback will generally
considering collective adjustment, a • any other circumstances where the be considered when:
report is submitted to the Remuneration Committee consider adjustments • there is reasonable evidence of
Committee and Board Risk Committee should be made. employee misbehaviour or material
regarding any adjustments required to error; or
balanced scorecards or the overall GPS Judgement on individual performance • there is material failure of risk
and/or LTSP outcome to reflect in-year or adjustment is informed by taking into management at a Group, business area,
prior year risk matters. account the severity of the issue, the division and/or business unit level.
individual’s proximity to the issue and
The application of malus will generally be the individual’s behaviour in relation to
considered when: the issue. Individual adjustment may be
• there is reasonable evidence of applied through adjustments to balanced
employee misbehaviour or material scorecard assessments and/or through
error or that they participated in conduct reducing the variable remuneration
which resulted in losses for the Group or outcome.
failed to meet appropriate standards of
fitness and propriety;
 Lloyds Banking Group Annual Report and Accounts 2021 117

Remuneration Committee
The Committee comprises of five The purpose of the Committee is to Advisers
Non-Executive Directors from a wide set the remuneration for all Executive Mercer was appointed by the Committee
background to provide a balanced and Directors and the Chair, including in 2016 following a competitive tender
independent view on remuneration matters. pension rights and any compensation process and was retained for 2021. The
Two of the three designated independent payments. It recommends and monitors Committee is of the view that Mercer
Non-Executive Directors of the Ring- the level and structure of remuneration provides independent remuneration
Fenced Banks also attend meetings of the for senior management and material advice to the Committee and does not
Committee as observers in order to provide risk takers. It also considers, agrees and have any connections with the Group
insights on matters relevant to the Ring- recommends to the Board an overall or any Director that may impair its
Fenced Banks and as part of their role in remuneration policy and philosophy for independence. The broader Mercer
the Group’s overall governance structure. the Group that is aligned with its long- company provides unrelated advice on
During the year Stuart Sinclair stepped term business strategy, its business accounting and investments. Mercer
down as Chair of the Committee and was objectives, its risk appetite, purpose and attended Committee meetings upon
replaced by Alan Dickinson with effect values and the long-term interests of the invitation and fees payable for the
from 24 November 2021. Alan has been Group, and recognises the interests of provision of services in 2021 were £624.
a member of the Committee since July relevant stakeholders, including the wider
2015 and Stuart remains a member of the workforce. The Committee’s operation
Committee, but has notified the Board that is designed to ensure that no conflicts
he will retire at the 2022 Annual General of interest arise, and in particular, the
Meeting. For further details of Committee Committee ensures that no individual is
membership and attendance at meetings, present when matters relating to their own
please see page 77. remuneration are discussed.

Governance
How the Remuneration Committee spent its time in 2021 and compliance with the 2018 Corporate Governance Code

Committee activities in the year Jan Feb May Sept Nov

Executive directors remuneration

Executive Director remuneration policy implementation,
balance scorecards and pay proposals

Group Performance Share, Long Term Share Plan and individual assessment

Remuneration for other Senior Executives

Directors’ remuneration report

All employee remuneration

Group Performance Share pool, balanced scorecard performance
and 2022 pay proposals
Group-wide reward, gender and ethnic pay gap
Remuneration aspects of the workforce engagement

Reward governance
Consideration of policy, risk, control and conduct matters

Statement of voting at Annual General Meeting

The table below sets out the voting outcome at the Annual General Meeting in May 2021 in relation to the annual report on
remuneration and the Remuneration Policy, last voted on in 2020.
Votes cast Votes cast Votes
in favour against withheld
Number of Percentage Number of Percentage Number of
shares of votes shares of votes shares
(millions) cast (millions) cast (millions)

2020 annual report on remuneration (advisory vote) 42,067 94.35% 2,518 5.65% 26
Directors’ Remuneration Policy (binding vote in 2020) 1
29,212 63.82% 16,562 36.18% 858

1 During 2020 we engaged with shareholders and responded to feedback on the Directors’ Remuneration Policy, for more detail see page 118 of the 2020 Directors’
remuneration report.
118 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

Directors’ Remuneration Policy

The Group’s remuneration policy was approved at the AGM on 21 May 2020 and took effect from that date. It is intended that approval
of the remuneration policy will be sought at three-year intervals, unless amendments to the policy are required, in which case further
shareholder approval will be sought; no changes are proposed for 2022. The full policy is set out in the 2019 Annual Report and
Accounts (pages 115 to 123) which is available at: 2019_lbg_annual_report.pdf (lloydsbankinggroup.com)

The tables in this section provide a summary of the Directors’ Remuneration Policy. There is no significant difference between the policy
for Executive Directors and that for other colleagues. Further information about the remuneration policy for other colleagues is set out
in section ‘Other remuneration disclosures’ on pages 122 to 127.

Remuneration policy table for Executive Directors

Base salary
Purpose and link to strategy the Group and ensures that decisions will normally be in line with the increase
To support the recruitment and retention are made within the following two awarded to the overall employee
of Executive Directors of the calibre parameters: population. However, a greater salary
required to develop and deliver the • An objective assessment of the increase may be appropriate in
Group’s strategic priorities. Base salary individual’s responsibilities and the size certain circumstances, such as a new
reflects the role of the individual, taking and scope of their role, using objective appointment made on a salary below a
account of market competitiveness, job-sizing methodologies. market competitive level, where phased
responsibilities and experience, and pay in • Pay for comparable roles in comparable increases are planned, or where there has
the Group as a whole. publicly listed financial services groups been an increase in the responsibilities
of a similar size. of an individual. Where increases are
Operation awarded in excess of the wider employee
Base salaries are typically reviewed Salary may be paid in sterling or other population, the Committee will provide an
annually with any increases normally currency and at an exchange rate explanation in the relevant annual report
taking effect from 1 April for Executive determined by the Committee. on remuneration.
Directors. When determining and
reviewing base salary levels, the Maximum potential Performance measures
Committee takes into account base salary The Committee will make no increase N/A
increases for employees throughout which it believes is inconsistent with
the two parameters above. Increases

Fixed share award

Purpose and link to strategy Operation Maximum potential
To ensure that total fixed remuneration is The fixed share award will be delivered The maximum award is 100 per cent of
commensurate with role and to provide a entirely in Lloyds Banking Group shares, base salary.
competitive reward package for Executive released over three years with 33 per
Directors with an appropriate balance of cent being released each year following Performance measures
fixed and variable remuneration, in line the year of award. The Committee can, N/A
with regulatory requirements. however, decide to deliver some or all of it
in the form of cash.

Pension
Purpose and link to strategy contribution scheme with Company All future appointments as Executive
To provide cost effective and market contributions set as a percentage of salary. Directors will also attract a maximum
competitive retirement benefits, An individual may elect to receive some allowance of 15 per cent of base salary
supporting Executive Directors in building or all of their pension allowance as cash in in line with the majority of the workforce.
long-term retirement savings. lieu of pension contribution. Maximum allowance may be increased or
decreased in order to remain aligned.
Operation Maximum potential
Executive Directors are entitled to The maximum allowance for all Executive Performance measures
participate in the Group’s defined Directors is 15 per cent of base salary. N/A
 Lloyds Banking Group Annual Report and Accounts 2021 119

Benefits
Purpose and link to strategy such as accommodation, relocation and Maximum potential
To provide flexible benefits as part of a travel. The Committee retains the right to The Committee will only make increases
competitive remuneration package. provide additional benefits depending on in the benefits currently provided which
individual circumstances. it believes are consistent with the two
Operation parameters above. Executive Directors
Benefits may include those currently When determining and reviewing the receive a flexible benefits allowance, in
provided and disclosed in the annual level of benefits provided, the Committee line with all other colleagues. The flexible
report on remuneration. ensures that decisions are made within the benefits allowance does not currently
following two parameters: exceed 4 per cent of base salary.
Core benefits include private medical • An objective assessment of the
insurance, life insurance and other individual’s responsibilities and the size Performance measures
benefits that may be selected through the and scope of their role, using objective N/A
Group’s flexible benefits plan. job-sizing methodologies.
• Benefits for comparable roles in
Additional benefits may be provided to comparable publicly listed financial
individuals in certain circumstances such services groups of a similar size.
as relocation. This may include benefits

All-employee plans
Purpose and link to strategy on the same basis as other eligible two-for-one match. Currently a three-for-
Executive Directors are eligible to employees. two match is operated up to a maximum
participate in HMRC-approved share plans colleague investment of £30 per month.
which promote share ownership by giving Maximum potential The maximum value of free shares that

Governance
employees an opportunity to invest in Participation levels may be increased up may be awarded in any year is £3,600.
Group shares. to HMRC limits as amended from time to
time. The monthly savings limits for Save Performance measures
Operation As You Earn (SAYE) is currently £500. The N/A
Executive Directors may participate in maximum value of shares that may be
these plans in line with HMRC guidelines purchased under the Share Incentive Plan
currently prevailing (where relevant), (SIP) in any year is currently £1,800 with a

Group Performance Share Plan

Purpose and link to strategy level commensurate with business and/ non-financial measures and the weighting
To incentivise and reward the achievement or individual performance or other of these measures will be determined
of the Group’s annual financial and factors as determined by the Committee. annually by the Committee.
strategic targets whilst supporting the The Committee may reduce the level
delivery of long- term superior and of award (including to zero), apply All assessments of performance are
sustainable returns. additional conditions to the vesting, or ultimately subject to the Committee’s
delay the vesting of deferred awards to judgement, but no award will be made if
Operation a specified date or until conditions set threshold performance (as determined
Measures and targets are set annually and by the Committee are satisfied, where by the Committee) is not met for financial
awards are determined by the Committee it considers it appropriate. Awards may measures or the individual receives less
after the year end based on performance be subject to malus and clawback for a than 40 per cent out of 100 per cent.
against the targets set. The Group period of up to seven years after the date The normal ‘target’ level of the Group
Performance Share may be delivered of award which may be extended to 10 Performance Share is 50 per cent of
partly in cash, shares, notes or other years where there is an ongoing internal or maximum opportunity.
debt instruments including contingent regulatory investigation.
convertible bonds. Where all or part of The Committee is committed to providing
any award is deferred, the Committee may Maximum potential transparency in its decision making in
adjust these deferred awards in the event The maximum Group Performance Share respect of Group Performance Share
of any variation of share capital, demerger, opportunities are 140 per cent of base awards and will disclose historic measures
special dividend or distribution or amend salary for the Group Chief Executive and target information together with
the terms of the plan in accordance with and 100 per cent of base salary for other information relating to how the Group
the plan rules. Executive Directors. has performed against those targets in
the annual report on remuneration for the
Where an award or a deferred award is in Performance measures relevant year except to the extent that this
shares or other share-linked instrument, Measures and targets are set annually by information is deemed to be commercially
the number of shares to be awarded the Committee in line with the Group’s sensitive, in which case it will be disclosed
may be calculated using a fair value or strategic business plan and further once it is deemed not to be sensitive.
based on discount to market value, as details are set out in the annual report
appropriate. The Committee applies on remuneration for the relevant year.
its judgement to determine the payout Measures consist of both financial and
120 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

Long Term Share Plan

Purpose and link to strategy Vesting will be subject to an assessment Maximum potential
Long term variable reward opportunity to of underpin thresholds being maintained The maximum Long Term Share Plan
align executive management incentives measured over a period of three years, or opportunity under the Policy is 200
and behaviours to the Group’s objectives such longer period, as determined by the per cent of base salary for all Executive
of delivering long-term superior and Committee. Directors.
sustainable returns. The Long Term Share
Plan will incentivise stewardship over a The Committee retains full discretion to The maximum for the current Group Chief
long time horizon and promote good amend the payout levels should the award Executive will be 150 per cent of base salary.
governance through a simple alignment not reflect business and/or individual
with the interest of shareholders. performance. The Committee may Performance measures
reduce (including to zero) the level of the An award may be granted by the
Operation award, apply additional conditions to the Remuneration Committee taking into
From 2021, awards will be granted under vesting, or delay the vesting of awards account an assessment of performance
the rules of the 2020 Long-Term Share to a specified date or until conditions set of the Company, any Member of the
Plan, that were approved at the AGM on by the Committee are satisfied, where it Group or business unit or team, and/or
21 May 2020. Awards are made in the form considers it appropriate. the performance, conduct or capability
of conditional shares and award levels of the participant, on such basis as the
are set at the time of grant, in compliance Awards may be subject to malus and Committee determine. The normal ‘target’
with regulatory requirements, and may be clawback for a period of up to seven level of the Long Term Share award is 150
subject to a discount in determining total years after the date of award which may per cent of base salary.
variable remuneration under the rules set be extended to 10 years where there
by the European Banking Authority. The is an ongoing internal or regulatory No further performance conditions will
number of shares to be awarded may be investigation. apply. However vesting will be subject to the
calculated using a fair value or based on a underpins and Remuneration Committee
discount to market value, as appropriate. discretion as described on page 115.

Deferral of variable remuneration and holding periods

Operation compliance with regulatory requirements to a holding period in line with current
The Group Performance Share and Long (which currently require that at least 60 regulatory requirements).
Term Share plans are both considered per cent of total variable remuneration
variable remuneration for the purpose is deferred for seven years with pro rata A proportion of the aggregate variable
of regulatory payment and deferral vesting between the third and seventh remuneration may vest immediately on
requirements. The payment of variable year, and at least 50 per cent of total award. The remaining proportion of the
remuneration and deferral levels are variable remuneration is paid in shares or variable remuneration is then deferred in
determined at the time of award and in other equity linked instruments subject line with regulatory requirements.

Chair and Non-Executive Director fees

Purpose and link to strategy • Fees and benefits for comparable roles The Chair and the Non-Executive
To provide an appropriate reward to attract in comparable publicly listed financial Directors are not entitled to receive any
and retain a high-calibre individual with the services groups of a similar size. payment for loss of office (other than in
relevant skills, knowledge and experience the case of the Chair’s fees for the six
The Chair receives an all-inclusive fee, month notice period) and are not entitled
Operation which is reviewed periodically plus to participate in the Group’s bonus, share
The Committee is responsible for evaluating benefits including life insurance, medical plan or pension arrangements. Non-
and making recommendations to the Board insurance, annual medical screening and Executive Directors are reimbursed for
with regards to the Chair’s fees. The Chair transportation. The Committee retains expenses incurred in the course of their
does not participate in these discussions. the right to provide additional benefits duties, such as travel and accommodation
The Group Chief Executive and the Chair depending on individual circumstances. expenses, on a grossed-up basis (where
are responsible for evaluating and making Non-Executive Directors are paid a applicable).
recommendations to the Board in relation basic fee plus additional fees for the
to the fees of the Non-Executive Directors. chairmanship/membership of Committees Maximum potential
When determining and reviewing fee and and for membership of Group companies/ The Committee will make no increase
benefit levels, the Committee ensures that boards/non-board level committees. in fees or benefits currently provided
decisions are made within the following which it believes is inconsistent with the
parameters: Additional fees are also paid to the Senior parameters above.
• The individual’s skills and experience. Independent Director and to the deputy
• An objective assessment of the chair to reflect additional responsibilities. Performance metrics
individual’s responsibilities and the size Any increases normally take effect from N/A
and scope of their role, using objective 1 January of a given year.
job sizing methodologies.

Service agreements Letters of appointment the articles of association, at any time

The service contracts of all current The Non-Executive Directors all have with immediate effect and without
Executive Directors are terminable on 12 letters of appointment and are appointed compensation. All Directors are subject to
months’ notice from the Group and six for an initial term of three years after which annual re-election by shareholders.
months’ notice from the individual. The their appointment may continue subject to
Chair also has a letter of appointment. His an annual review. Non-Executive Directors The service contracts and letters of
engagement may be terminated on six may have their appointment terminated, in appointments are available for inspection
months’ notice by either the Group or him. accordance with statute, regulation and at the Company’s registered office.
 Lloyds Banking Group Annual Report and Accounts 2021 121

Provision 40
Our remuneration principles promote the long-term success of the business, avoid excessive or inappropriate risk taking and align
management’s interests with those of shareholders. Below is how remuneration is aligned with the principles of the Code.

Clarity Proportionality

• Our remuneration framework is structured to support the • There is clear alignment between the performance of the
financial and non-financial objectives of the Group, aligning Group, the business strategy, and the reward paid to Executive
the interests of our Executive Directors with those of our Directors.
shareholders. • Reward outcomes are reviewed by the Committee and may be
• The Committee regularly engages and consults with key adjusted having considered the overall Group performance and
shareholders to take into account feedback. wider workforce remuneration.
• We are committed to transparent communication with all our • The Committee has the discretion to reduce the annual
stakeholders. bonus and LTSP awards, if it considers the pay-out does not
appropriately reflect the performance of the Group during the
performance period.

Simplicity Risk

• We operate a simple, but effective remuneration framework, • Our remuneration is structured to align with the Group’s risk
which is applied across the whole Group. management framework.
• The annual bonus and LTSP are measured against a single • The annual bonus, deferred bonus and LTSP incorporate malus
balanced scorecard, with clear line of sight for management and and clawback provisions, and overarching Committee discretion

Governance
shareholders. to adjust formulaic outcomes.

Predictability Alignment to culture

• The remuneration outcomes under the different performance • When considering performance, the Committee takes account
scenarios (threshold, target, and maximum) are clearly set out. of the Group’s values.
• Annual bonus and LTSP scorecard contain non-financial
measures linked to reducing environmental impact, customer
satisfaction and diversity and employee engagement.
122 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

Other remuneration disclosures

This section discloses the remuneration Decision making process for The Remuneration Committee works
awards made by the Group to Material closely with the Risk Committee in
Risk Takers (MRTs) in respect of the 2021 remuneration policy ensuring the Group Performance Share
performance year. Additional information The Group has a strong belief in aligning (GPS) plan outcome is moderated. The
summarising the Group’s remuneration the remuneration delivered to the two Committees determine whether the
policies, structure and governance is also Group’s executives with the successful proposed GPS outcome and performance
provided. These disclosures should be performance of the business and, through assessments adequately reflect the risk
read in conjunction with the disclosures this, the delivery of long-term, superior appetite and framework of the Group;
for Executive Directors contained in the and sustainable returns to shareholders. whether it took account of current and
Directors’ Remuneration Report (DRR) It has continued to seek the views of future risks; and whether any further
on pages 101 to 121 and the Directors’ shareholders and other key stakeholders adjustment is required or merited. The
Remuneration Policy (DRP) on pages with regard to remuneration policy Group and the Remuneration Committee
115 to 123 of the 2019 Annual Report. and seeks to motivate, incentivise and are determined to ensure that the
Together these disclosures comply with retain talent while being mindful of the aggregate variable remuneration for all
the requirements of Article 450 of the economic outlook. colleagues is appropriate and balanced
onshored and amended version Capital with the interests of shareholders and all
Requirements Regulation (EU) No. The overarching purpose of the other stakeholders.
575/2013 (CRR). Remuneration Committee is to consider,
agree and recommend to the Board The Remuneration Committee’s terms of
The remuneration principles and practices an overall remuneration policy and reference are available from the Company
detailed in the DRR apply to MRTs and philosophy for the Group that is defined Secretary and are displayed on the Group’s
non-MRTs in the same way as to Executive by, supports and is closely aligned to its website, www.lloydsbankinggroup.
Directors (other than where stated in this long-term business strategy, business com/ourgroup/corporate-governance.
disclosure). objectives, risk appetite and values These terms are reviewed each year to
and recognises the interests of relevant ensure compliance with the remuneration
In line with the PRA’s guidance, the stakeholders. The remuneration policy regulations and were last updated in
Group has applied the PRA version of governs all aspects of remuneration and January 2022.
the EBA Delegated Regulation (EU) No. applies in its entirety firm-wide to all
604/2014 as well as the draft revised divisions, business units and companies
in the Group, including wholly-owned Link between pay and
Regulatory Technical Standards (RTS) for
the identification of material risk takers overseas businesses and all colleagues, performance
published by the EBA in June 2020 to contractors and temporary staff. The The Group’s approach to reward is
determine which colleagues should be Committee reviews the policy annually intended to provide a clear link between
identified as MRTs. MRTs are colleagues and approves all compensation for remuneration and delivery of its key
who are considered to have a material Executive Directors, GEC members and strategic objectives, supporting the aim
impact on the Group’s risk profile, and attendees, senior risk and compliance of becoming the best bank for customers,
include, but are not limited to: officers, high earners and any other and through that, for shareholders. To
MRTs. During 2021 the Committee had this end, the performance management
• Board Executive Directors, Board six scheduled meetings. Further details
Non-Executive Directors and members process has been developed, with close
and attendees of the Group Executive on the operation of the Remuneration participation from Group Risk, to ensure
Committee (GEC) and their respective Committee and independent advice there is a clear alignment between award
executive level direct reports received during the year can be found on outcomes and individual performance,
page 117 of the DRR. growth and development, whilst also
• Business and Function Heads and
their respective direct reports. Senior reflecting divisional achievement.
Management Function (SMF) holders The Group has a robust governance
and certain Certified roles. framework in place, which is cascaded The use of a balanced scorecard approach
through the Group with the Group People to measure performance enables the
• Other highly remunerated individuals Committee having oversight for all other
whose activities could have a material Remuneration Committee to assess
impact on the Group’s risk profile colleagues. the performance of the Group and its
senior executives in a consistent and
This section discloses information Governance and risk performance-driven way. The Group’s
regarding the Group’s remuneration remuneration policy supports the business
management values and strategy, based on building
arrangements on a consolidated basis. An essential component of the approach
Additional disclosures in respect of long-term relationships with customers
to remuneration is the governance and colleagues and managing the financial
Lloyds Bank, Bank of Scotland plc process that underpins it. This ensures
and Lloyds Bank Corporate Markets consequences of business decisions across
that the policy is robustly applied and risk the entire economic cycle.
plc will be published separately is managed appropriately. In addition
on the Group’s website, located at to setting the overall remuneration
www.lloydsbankinggroup.com/investors/ Further detail can be found in the DRR
policy and philosophy for the Group, the and the DRP. In particular, see pages 105
financial-downloads, from 8 March 2022. Remuneration Committee ensures that to 106.
colleagues who could have a material
impact on the Group’s risk profile are not
rewarded for excessive risk taking but are
provided with appropriate incentives that
recognise their individual contribution to
the success of the organisation.
 Lloyds Banking Group Annual Report and Accounts 2021 123

Design and structure

of remuneration
When establishing the remuneration policy
and associated frameworks, the Group
is required to take into account its size,
organisation and the nature, scope and
complexity of its activities. For the purpose
of remuneration regulation, Lloyds Bank
plc is treated as a Proportionality level I firm
and therefore subject to the more onerous
remuneration rules.

Remuneration is delivered via a

combination of fixed and variable
remuneration. Fixed remuneration reflects
the role, responsibility and experience of a
colleague. Variable remuneration is based
on an assessment of individual, business
area and Group performance. The mix
of variable and fixed remuneration is
driven by seniority and role. Taking into
account the expected value of awards,

Governance
the performance-related elements of
pay make up a considerable proportion
of the total remuneration package for
MRTs, whilst maintaining an appropriate
balance between the fixed and variable
elements. The maximum ratio of variable
to fixed remuneration for MRTs is 200 per
cent, which was approved by shareholders
(98.77 per cent of votes cast) at the AGM
on 15 May 2014.

Remuneration for control functions is

set in relation to benchmark market data
to ensure that it is possible to attract
and retain staff with the appropriate
knowledge, experience and skills. An
appropriate balance between fixed and
variable compensation supports this
approach. Generally, control function
staff receive a higher proportion of fixed
remuneration than other colleagues.
Particular attention is paid to ensure
remuneration for control function staff is
linked to the performance of their function
and independent from the business areas
they control.
124 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

The table below summarises the different remuneration elements for MRTs
(this includes control function staff) and non-MRTs.

Base salary
Base salaries are reviewed annually, taking Applies to: • Colleagues performing a Senior
into account individual performance and • Executive Directors, members/ Management Function
market information. Further information attendees of the Group Executive • Other MRTs
on base salaries can be found on page Committee and their respective direct • Non-MRTs
115 of the DRP. reports

Fees
Non-Executive Director fees are reviewed Applies to:
periodically by the Board. Further • Non-Executive Directors
information on fees can be found on page
111 of the DRR and page 123 of the DRP.

Fixed share award

The fixed share award, made annually, The fixed share award can be amended or Applies to:
delivers Lloyds Banking Group shares over withdrawn in the following circumstances: • Executive Directors, members/
a period of five years. With effect from • to reflect a change in role; attendees of the Group Executive
2020 fixed share awards will be delivered • to reflect a Group leave policy (e.g. Committee and their respective direct
over a period of three years (subject parental leave or sickness absence); reports
to shareholder approval for Executive • termination of employment with the • Colleagues performing a Senior
Directors). Its purpose is to ensure that Group; Management Function1
total fixed remuneration is commensurate • if the award would be inconsistent with • Other MRTs1
with the role, responsibilities and any applicable legal, regulatory or tax • Non-MRTs1
experience of the individual; provides requirements or market practice.
a competitive reward package; and is
appropriately balanced with variable Further information on fixed share awards
remuneration, in line with regulatory can be found on page 116 of the DRP.
requirements.

Benefits
Core benefits for UK-based colleagues • to reflect a change to colleague Applies to:
include pension, private medical contractual terms; • Non-Executive Directors
insurance, life insurance and other • to reflect a change of grade; • Executive Directors, members/
benefits that may be selected through • termination of employment with the attendees of the Group Executive
the Group’s flexible benefits plan. Further Group; Committee and their respective direct
information on benefits and all-employee • to reflect a change of Reward Strategy/ reports
share plans can be found on page 116 benefit provision; • Colleagues performing a Senior
of the DRP. Benefits can be amended or • if the award would be inconsistent with Management Function
withdrawn in the following circumstances: any statutory or tax requirements. • Other MRTs
• Non-MRTs
Details of Non-Executive Directors’
benefits are set out on page 123 of the
DRP.

Group Performance Share

The Group Performance Share (GPS) plan • Group balanced scorecard performance Applies to:
is an annual discretionary bonus plan. The • Collective and discretionary • Executive Directors, members/
plan is designed to reflect specific goals adjustments to reflect risk matters and/ attendees of the Group Executive
linked to the performance of the Group. or other factors. Committee and their respective direct
The majority of colleagues and all MRTs reports
participate in the GPS plan. The Group applies deferral arrangements • Colleagues performing a Senior
to GPS and variable pay awards made Management Function
Individual GPS awards are based upon to colleagues. GPS awards for MRTs are • Other MRTs
individual contribution, overall Group subject to deferral and a holding period • Non-MRTs
financial results and performance in line with regulatory requirements and
conversations over the past financial market practice.
year. The Group’s total risk-adjusted
GPS outcome is determined by the Further information on the GPS plan can
Remuneration Committee annually as a be found on page 119 of the DRR as well
percentage of the Group’s underlying as page 117 of the DRP.
profit, modified for:
 Lloyds Banking Group Annual Report and Accounts 2021 125

Long Term Share Plan

The Long Term Share Plan is the Group’s The number of shares to be awarded Further detail of the awards made in 2022
long-term incentive opportunity to align may be calculated using a fair value or can be found on page 115 of the DRR.
executive management and behaviour based on a discount to market value, as
to the Group’s objectives of delivering appropriate. Applies to:
long-term superior and sustainable • Executive Directors, members/
returns. Senior colleagues, including Vesting of awards will be subject to an attendees of the Group Executive
MRTs, are eligible to participate in the assessment of underpin thresholds being Committee and their respective direct
plan. Individual awards are based upon maintained measured over a period of reports1
individual contribution. three years, or such longer period, as • Colleagues performing a Senior
determined by the Committee. Awards Management Function1
Awards are made in the form of for MRTs are subject to deferral and a • Other MRTs1
conditional shares and award levels are holding period in line with regulatory • Non-MRTs1
set at the time of grant, in compliance requirements and market practice.
with regulatory requirements, and may
be subject to a discount in determining
totalvariable remuneration under the rules
set by the European Banking Authority.

Deferral, vesting and For all colleagues, any deferred variable may be extended to ten years where
remuneration is subject to performance there is an ongoing internal or regulatory
performance adjustment adjustment (malus) in accordance with investigation. Clawback is used alongside
At least 40 per cent of MRTs’ variable the Group’s Deferral and Performance other performance adjustment processes.
remuneration is deferred into Lloyds Adjustment Policy.
Banking Group Shares. For all MRTs, Further information on deferral, vesting
variable remuneration is deferred in MRTs’ vested variable remuneration and performance adjustment can be

Governance
line with the regulatory requirements (including variable remuneration subject found in the DRR on pages 116 and 118 of
for a period of four, five or seven years, to a holding period) can be recovered the DRP.
(depending on category of MRT). At from colleagues up to seven years after
least 50 per cent of each vested award is the date of award in the case of a material
subject to a 12 month holding period. or severe risk event (clawback). This period

Guaranteed variable Any awards made to new hires to Applies to:

remuneration
compensate them for unvested variable • Executive Directors, members/
remuneration they forfeit on leaving their attendees of the GEC and their
Guarantees, such as sign-on awards, previous employment will be subject respective direct reports
may only be offered in exceptional
circumstances to new hires for the first
to appropriate retention, deferral, • Colleagues performing a Senior
performance and clawback arrangements Management Function
year of service and in accordance with
regulatory requirements.
in accordance with applicable regulatory • Other MRTs
requirements. • Non-MRTs
Retention awards may be made to existing
colleagues in limited circumstances and
are subject to prior regulatory approval
in line with applicable regulatory
requirements.

Shareholding requirement Applies to:

Executive Directors: see DRR page 111. • Executive Directors and members/
attendees of the Group Executive
For members/attendees of the GEC, at Committee
least 100 per cent of their salary and fixed
share award must be held in shares.

Termination payments Applies to:

Executive Directors and GEC members: • Executive Directors, members/
see pages 121 to 123 of the 2019 DRR. attendees of the Group Executive
Committee and their respective direct
All other termination payments comply reports
with the Group’s contractual, legal and • Colleagues performing a Senior
regulatory requirements and are made Management Function
in such a way as to ensure they do not • Other MRTs
reward failure or misconduct and reflect • Non-MRTs
performance over time.

1 Eligibility based on seniority and role.

126 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

REM1 Remuneration awarded for the financial year

MB Other Other
Supervisory MB Management senior identified
function function management staff

Fixed Number of identified staff 9 3 15 248

remuneration
Total fixed remuneration £2,579,502 £6,448,308 £13,752,032 £78,505,660
Of which: cash-based £2,579,502 £3,230,511 £8,751,385 £65,363,745
Of which: shares or equivalent ownership interests 1
– £2,604,000 £3,215,884 £1,837,590
Of which: share-linked instruments or equivalent non-cash
instruments – – – –
Of which: other instruments – – – –
Of which: other forms – £613,797 £1,784,763 £11,304,324
Variable Number of identified staff – 3 13 221
remuneration
Total variable remuneration – £5,415,947 £11,851,889 £58,070,725
Of which: cash-based – £1,357,449 £2,058,580 £17,367,812
Of which: deferred – £814,470 £1,235,149 £4,940,041
Of which: shares or equivalent ownership interests – £4,058,498 £9,793,309 £39,199,859
Of which: deferred – £3,515,517 £8,969,876 £26,282,290
Of which: share-linked instruments or equivalent non-cash
instruments – – – £1,503,052
Of which: deferred – – – £797,984
Of which: other instruments – – – –
Of which: deferred – – – –
Of which: other forms – – – –
Of which: deferred – – – –
Total
remuneration £2,579,502 £11,864,255 £25,603,921 £136,576,385

1 Released over a three-year period.

Notes:
Senior Management is defined as Group Executive Committee (GEC) members/attendees (excluding Group Executive Directors and Non-Executive Directors). In 2020 and prior
years Senior Management includes GEC direct reports (excluding those direct reports who do not materially influence the risk profile of any in-scope group firm).

Values for Long Term Share Plan awards are based on face value at grant. An EBA discount factor has not been applied to awards made in 2022 in respect of performance
year 2021.

Fixed remuneration is calculated using annualised salary.

 Lloyds Banking Group Annual Report and Accounts 2021 127

REM2 Special payments to staff whose professional activities have a material impact on institutions’
risk profile (identified staff)
MB MB Other
Supervisory Management Other senior identified
function function management staff

Guaranteed variable remuneration awards

Guaranteed variable remuneration awards – Number of identified staff – 1 – 2
Guaranteed variable remuneration awards – Total amount – £1,316,564 – £257,000
Of which guaranteed variable remuneration awards paid during the financial year, that are
not taken into account in the bonus cap – – – –
Severance payments awarded in previous periods, that have been paid out during the
financial year
Severance payments awarded in previous periods, that have been paid out during the
financial year – Number of identified staff – – 1 2
Severance payments awarded in previous periods, that have been paid out during the
financial year – Total amount – – £47,685 £244,371
Severance payments awarded during the financial year
Severance payments awarded during the financial year – Number of identified staff – – – 7
Severance payments awarded during the financial year – Total amount – – – £1,003,081
Of which paid during the financial year – – – £498,554

Governance
Of which deferred – – – £504,527
Of which severance payments paid during the financial year, that are not taken into
account in the bonus cap – – – –
Of which highest payment that has been awarded to a single person – – – £381,905
128 Lloyds Banking Group Annual Report and Accounts 2021

Directors’ remuneration report continued

REM3 Deferred remuneration

Total amount
of adjustment
during the
Amount of financial year
performance due to ex post Total of amount
Amount of adjustment implicit of deferred
performance made in the adjustments remuneration
adjustment financial year (i.e. changes Total amount of awarded for
Total amount of made in the to deferred of value of deferred previous
deferred financial year remuneration deferred remuneration performance
remuneration to deferred that was due remuneration awarded before period that has
awarded for remuneration to vest in due to the the financial vested but is
previous Of which due to Of which vesting that was due future changes of year actually subject to
Deferred and retained performance vest in the in subsequent to vest in the performance prices of paid out in the retention
remuneration periods financial year financial years financial year years instruments) financial year periods

MB Supervisory function – – – – – – – –
Cash-based – – – – – – – –
Shares or equivalent
ownership interests – – – – – – – –
Share-linked
instruments or
equivalent non-cash
instruments – – – – – – – –
Other instruments – – – – – – – –
Other forms – – – – – – – –
MB Management function – – – – – – – –
Cash-based – – – – – – – –
Shares or equivalent
ownership interests £10,139,832 £764,562 £9,375,269 – – – £637,464 £127,099
Share-linked
instruments or
equivalent non-cash
instruments – – – – – – – –
Other instruments – – – – – – – –
Other forms – – – – – – – –
Other senior management – – – – – – – –
Cash-based – – – – – – – –
Shares or equivalent
ownership interests £46,042,863 £3,373,160 £42,669,702 – – – £2,564,625 £808,536
Share-linked
instruments or
equivalent non-cash
instruments – – – – – – – –
Other instruments – – – – – – – –
Other forms – – – – – – – –
Other identified staff – – – – – – – –
Cash-based – – – – – – – –
Shares or equivalent
ownership interests £99,102,762 £12,971,477 £86,131,285 – – – £9,584,476 £3,387,001
Share-linked
instruments or
equivalent non-cash
instruments – – – – – – – –
Other instruments – – – – – – – –
Other forms – – – – – – – –
Total amount £155,285,457 £17,109,199 £138,176,256 – – – £12,786,565 £4,322,636

Notes:
Non-Executive Directors are not eligible to receive variable remuneration.

All deferred and unvested variable remuneration is in shares.

 Lloyds Banking Group Annual Report and Accounts 2021 129

REM 4 Remuneration of 1 million EUR or more per year

Identified staff
that are high
earners as set out
in Article 450(i)
EUR CRR

1,000,000 to below 1,500,000 12

1,500,000 to below 2,000,000 1
2,000,000 to below 2,500,000 6
2,500,000 to below 3,000,000 1
3,000,000 to below 3,500,000 –
3,500,000 to below 4,000,000 –
4,000,000 to below 4,500,000 –
4,500,000 to below 5,000,000 1
5,000,000 to below 6,000,000 –
6,000, 000 to below 7,000,000 –
7,000,000 to below 8,000,000 –

Notes:
Converted to Euros using £1: €1.18227 (the exchange rate used by the European Commission for financial programming for December 2021). The exchange rate used for 2020
was £1 = €1.11804.

Governance
Values for Long Term Share Plan awards are based on face value at grant. An EBA discount factor has not been applied to awards made in 2022 in respect of performance
year 2021.

Total number of Material Risk Takers earning more than €1m has increased from 17 in 2020 to 21 in 2021.

REM5 Information on remuneration of staff whose professional activities have a material impact on
institutions’ risk profile (identified staff)
Management body remuneration Business areas
Independent
MB MB internal
Supervisory Management Total Investment Retail Asset Corporate control All
function function MB banking banking1 management functions functions other Total

Total number of
identified staff 275

Of which: members
of the MB 9 3 12

Of which: other
senior management – 2 – 5 3 5

Of which: other
identified staff 37 61 – 63 46 41

Total remuneration
of identified staff £2,579,502 £11,864,255 £14,443,757 £22,609,105 £41,108,975 – £41,736,326 £28,706,267 £28,019,632

Of which: variable
remuneration – £5,415,947 £5,415,947 £9,624,805 £18,845,677 – £19,334,785 £11,457,829 £10,659,518

Of which: fixed
remuneration £2,579,502 £6,448,308 £9,027,810 £12,984,300 £22,263,298 – £22,401,541 £17,248,438 £17,360,114

1 Retail Banking includes the Retail and Commercial Banking divisions.

130 Lloyds Banking Group Annual Report and Accounts 2021

Other statutory and regulatory information

This Directors’ report on pages 70 to 133 is our Directors’ report for the purposes of the Companies Act 2006 and fulfils the
requirements of the corporate governance statement for the purposes of the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules (DTR).

Profit and dividends Directors’ and Officers’ liability insurance

The consolidated income statement shows a statutory profit Throughout 2021 the Group had appropriate insurance cover in
before tax for the year ended 31 December 2021 of £6,902 million place to protect Directors, including the Directors who retired
(2020: £1,226 million). during the year, from liabilities that may arise against them
personally in connection with the performance of their role.
The Directors have recommended a final dividend for 2021, which is
subject to approval by the shareholders at the AGM, of 1.33 pence As well as insurance cover, the Group agrees to indemnify the
per share, totalling £947 million. The final dividend will be paid Directors to the maximum extent permitted by law. Further
on 19 May 2022. A final dividend of 0.57 pence per share totalling information on the Group’s indemnity arrangements is provided
£404 million in respect of 2020 was paid on 25 May 2021, and an in the Directors’ indemnities section.
interim dividend of 0.67 pence per share totalling £473 million was
paid on 13 September 2021. Further information on dividends is
shown in note 43 on page 281 and is incorporated by reference. Capital Requirements
(Country-by-Country Reporting)
The Board continues to give due consideration at each year end As required under the Capital Requirements (Country-by-Country
to the return of any surplus capital and for 2021, the Board intends Reporting) Regulations 2013, the Group’s related disclosures may
to implement an ordinary share buyback of up to £2 billion, be found online, at
equivalent to up to 2.82 pence per share. This represents the www.lloydsbankinggroup.com/investors/financial-downloads.
return of capital over and above the Board’s view of the current
level of capital required to grow the business, meet regulatory
requirements and cover uncertainties.
Directors’ indemnities
The Directors of the Company, including the former Directors
who retired during the year, have entered into individual deeds of
The share buyback programme is intended to commence as
indemnity with the Company which constituted ‘qualifying third-
soon as is practicable and is expected to be completed, subject
party indemnity provisions’ for the purposes of the Companies
to continued authority from the PRA, by 31 December 2022.
Act 2006. The deeds indemnify the Directors to the maximum
Given the total ordinary dividend of 2.00 pence per share and
extent permitted by law and remain in force. The deeds were in
the intended share buyback, the total capital return for 2021 will
force during the whole of the financial year or from the date of
be up to 4.82 pence per share, an increase of 746 per cent on the
appointment in respect of the Directors appointed during 2021.
prior year, equivalent to up to £3.4 billion.
Deeds for existing Directors are available for inspection at the
Company’s registered office.
The Company intends to use the authority for the repurchase of
ordinary shares granted to it at the 2021 AGM to implement the
The Company has also granted deeds of indemnity by deed poll
proposed share buyback. Details of this existing authority are set
and by way of entering into individual deeds, which constitute
out under ‘Power of Directors in relation to shares’.
‘qualifying third-party indemnity provisions’ to the Directors of
the Group’s subsidiary companies, including to former Directors
Appointment and retirement of Directors who retired during the year and since the year end, and to Group
The appointment and retirement of Directors is governed by the colleagues subject to the provisions of the Senior Managers
Company’s articles of association, the UK Corporate Governance and Certification Regime. Such deeds were in force during the
Code and the Companies Act 2006. The Company’s articles of financial year ended 31 December 2021 and remain in force as at
association may only be amended by a special resolution of the the date of this report.
shareholders in a general meeting.
Qualifying pension scheme indemnities have also been granted
Charlie Nunn was appointed to the Board on 16 August 2021. to the Trustees of the Group’s pension schemes, which were in
Harmeen Mehta was appointed to the Board on 1 November force for the whole of the financial year and remain in force as at
2021. Both will therefore stand for election at the forthcoming the date of this report.
AGM. In the interests of good governance and in accordance with
the provisions of the UK Corporate Governance Code, all other
Directors will retire, and those wishing to serve again will submit
Change of control
The Company is not party to any significant agreements which
themselves for re-election at the forthcoming AGM. As explained
take effect, alter or terminate upon a change of control of the
on page 70, Stuart Sinclair will step down from the Board at the
Company following a takeover bid. There are no agreements
forthcoming AGM and is not seeking re-election.
between the Company and its Directors or employees providing
compensation for loss of office or employment that occurs
Biographies of the current Directors are set out on pages 72 to
because of a takeover bid.
73. Details of the Directors seeking election or re-election at the
AGM are set out in the Notice of Meeting.
Power of Directors in relation to shares
The Board manages the business of the Company under the
Board composition changes powers set out in the articles of association, which include the
Changes to the composition of the Board since 1 January 2021 up
Directors’ ability to issue or buy back shares. The Directors were
to the date of this report are shown in the table below:
granted authorities to issue and allot shares and to buy back
Joined the Board Left the Board shares at the 2021 AGM. Shareholders will be asked to renew
Charlie Nunn 16 August 2021 these authorities at the 2022 AGM. The authority in respect
of purchase of the Company’s ordinary shares is limited to
Harmeen Mehta 1 November 2021
7,088,402,568 ordinary shares, equivalent to 10 per cent of the
Lord Blackwell 1 January 2021 issued ordinary share capital of the Company as at the latest
Sir António Horta-Osório 30 April 2021 practicable date prior to publication of the 2021 AGM circular.
Sara Weller 20 May 2021
Nick Prettejohn 30 September 2021

As announced in September 2021, Stuart Sinclair will retire at the forthcoming AGM.
 Lloyds Banking Group Annual Report and Accounts 2021 131

Conflicts of interest Substantial shareholders

The Board has a comprehensive procedure for reviewing, and as Information provided to the Company by substantial shareholders
permitted by the Companies Act 2006 and the Company’s articles pursuant to the DTR is published via a Regulatory Information
of association, approving actual and potential conflicts of interest. Service. As at 31 December 2021, the Company had been notified
Directors have a duty to notify the Chair and Company Secretary by its substantial shareholders under Rule 5 of the DTR of the
as soon as they become aware of actual or potential conflict following interests in the Company’s shares:
situations. Any changes to the commitments of Directors are % of issued share capital
reported to the Nomination and Governance Committee and the with rights to vote in all
Board, and a register of directors’ interests is regularly reviewed circumstances at
Interest in shares general meetings¹
and authorised by the Board to ensure the authorisation status
remains appropriate. BlackRock Inc. 3,668,756,765² 5.14%

Lord Lupton is a senior adviser to Greenhill Europe, an investment Harris Associates L.P. 3,546,216,787³ 4.99%
bank focused on providing financial advice on significant mergers,
acquisitions, restructurings, financings and capital raising to 1 Percentage provided was correct at the date of notification.
corporations, partnerships, institutions and governments. The 2 The most recent notification provided by BlackRock Inc. under Rule 5 of the
DTR identifies (i) an indirect holding of 3,599,451,380 shares in the Company
Board has authorised the potential conflicts and requires Lord
representing 5.04 per cent of the voting rights in the Company, and (ii) a holding of
Lupton to recuse himself from discussions, should the need arise. 69,305,385 in other financial instruments in respect of the Company representing
0.09 per cent of the voting rights of the Company. BlackRock Inc.’s holding
Branches most recently notified to the Company under Rule 5 of the DTR varies from the
holding disclosed in BlackRock Inc.’s Schedule 13-G filing with the US Securities
The Group provides a wide range of banking and financial and Exchange Commission dated 8 February 2022, which identifies beneficial
services through branches and offices in the UK and overseas. ownership of 6,484,743,601 shares in the Company representing 9.1 per cent of
the issued share capital in the Company. This variance is attributable to different
notification and disclosure requirements between these regulatory regimes.
Research and development activities 3 An indirect holding.
During the ordinary course of business, the Group develops new
products and services within the business units. No further notifications have been received under Rule 5 of the

Governance
DTR as at the date of this report.
Information incorporated by reference
Content Pages Post balance sheet events
Details of events since the date of the balance sheet are provided
Group results Summary of Group results 50 to 55 in note 53 on page 334.
Ordinary dividends Dividends on ordinary shares 281
Directors’ emoluments Directors’ remuneration report 101 to 129 Scope 1, 2 and 3 emissions reporting for our own
Internal control and Financial reporting risk 137
operations
The Group has reported greenhouse gas emissions and
financial risk
Risk management 37 to 42 environmental performance since 2009, and since 2013
management
135 to 193 this has been reported in line with the requirements of the
Companies Act 2006 and its applicable regulations and the
Financial instruments 289 to 300 Large and Medium Sized Companies and Groups (Accounts
303 to 322 and Reports) Regulations 2008 (as amended) (i.e. Streamlined
Information included Future developments 1 to 44 Energy and Carbon Reporting (`SECR’). Our total emissions,
in the strategic report in tonnes of CO 2 equivalent, are reported in the table below.
Supporting people with 34 Deloitte LLP has provided limited level ISAE 3000 (Revised)
disabilities assurance over selected non-financial indicators. Their full,
Engagement with colleagues 27 independent assurance statement is available online at
www.lloydsbankinggroup.com/who-we-are/responsible-
Engagement with customers, 26 to 29 business/downloads.
suppliers and others
Disclosures required Significant contracts 286 Methodology
under Listing Rule The Group follows the principles of the Greenhouse Gas (GHG)
Dividend waivers 288 Protocol Corporate Accounting and Reporting Standard to calculate
9.8.4R
Scope 1, 2 and 3 emissions from our worldwide operations. The
Principal risks and Funding and liquidity 39 and 171 reporting period is 1 October 2020 to 30 September 2021, which
uncertainties to 175 is different to that of our Directors’ report (January to December
Capital position 176 to 185 2021). This is in line with the regulations in that most of the emissions
reporting year falls within the period of the Directors’ report.
Viability statement Risk overview 43 Emissions are reported based on the operational control approach.
Going concern Risk overview 43
statement Reported Scope 1 emissions are those generated from gas and
oil used in buildings, emissions from fuels used in UK company
Share capital and Share capital and restrictions 278 owned vehicles used for business travel and fugitive emissions
control on the transfer of shares or from the use of air conditioning and chiller/refrigerant plant.
voting rights Reported Scope 2 emissions are generated from the use of
electricity and are calculated using both the location and market-
Special rights with regard to 278
based methodologies. Reported Scope 3 emissions relate to
the control of the Company
business travel and commuting undertaken by colleagues,
Employee share schemes – 278 emissions from colleagues working from home, operational waste
exercise voting rights and the extraction and distribution of each of our energy sources
– electricity, gas and oil.
132 Lloyds Banking Group Annual Report and Accounts 2021

Other statutory and regulatory information continued

Intensity Ratio Carbon emissions (tonnes CO2e)

Oct 2020 – Oct 2019 – Oct 2018 – Oct 2020 – Oct 2019 – Oct 2018 –
Legacy Sept 2021 Sept 2020 Sept 2019 Sept 2021 Sept 2020 Sept 2019

GHG emissions (CO2e) per £m 11.6 13.5 15.8 Total CO2e (market based) 118,057 119,878 180,002
of underlying income
Total CO2e (location based) 188,806 206,236 286,363
(Location Based)1
Total Scope 1 and 2 108,401 125,387 154,917
GHG emissions (CO2e) per £m 7.3 7.8 9.9
(location based)
of underlying income (Market
Based)1 – of which UK Scope 1 and 2 108,084 124,708 152,546
(location based)
1 Intensities have been restated for 2018–2019 and 2019–2020 to reflect changes
to emissions data only, replacing estimated data with actuals; underlying income
Total Scope 1 and 2 37,653 39,029 48,556
figures for those years have not changed. Scope 3 emissions include elements (market based)
within the Group’s own operations including emissions for waste, colleague
commuting and business travel (including taxis, tube, well to tank emissions of – of which UK Scope 1 and 2 37,336 38,728 47,872
business travel and hotels). Additionally, October 19–September 20 and October (market based)
20–September 21 Scope 3 figures include an allowance for emissions from
homeworkers not previously accounted for, owing to the significant increase in Total Scope 1 37,653 39,029 48,171
materiality year-on-year due to the impacts of COVID-19. Previous years have not
been restated.
Total Scope 2 _ _ 385
(market based)
This year, our overall location-based carbon emissions were Total Scope 2 70,748 86,358 106,745
188,806 tonnes CO2e; a 8.5 per cent since decrease since (location based)
2019/20. We have seen a continued reduction in our carbon
emissions this reporting year, mainly driven by the impact Total Scope 3 80,404 80,849 131,446
of coronavirus on our operations. A large proportion of our
colleagues continued to work from home in 2021 in line with travel
restrictions and advice, which has led to a considerable reduction Global energy use (kWhs)
in both scope 1 and 3 business travel numbers reported. Oct 2020 – Oct 2019 – Oct 2018 –
Sept 2021 Sept 2020¹ Sept 2019¹
Group energy consumption, electricity and gas, has also reduced Total global 474,364,203 517,459,510 589,853,483
mainly due to the impact of this operational shift. However, most energy use
of our buildings have still been operational and subject to our
continued energy management and optimisation programme. – of which UK 469,425,422 512,208,678 583,662,870
Throughout winter months we have seen a small increase in our energy use
gas consumption due to additional fresh air requirements in our
Total building 468,594,150 497,144,236 550,290,468
operational buildings. Overall, we have seen building energy
energy
consumption and associated carbon emissions reduced.
Total company 2,796,073 14,436,436 29,987,906
Since January 2019, our scope 2 market-based emissions figure owned vehicle
is zero tCO2e, as we have procured renewable electricity mainly energy
through our PPA and Green Tariff, and renewable certificates
equal to the remainder to make up the total electricity Total grey fleet 2,973,980 5,878,838 9,575,109
consumption in each of the markets we operate. vehicle energy²

1 Restated 2018/2019 and 2019/20 emissions data to improve the accuracy of

Omissions reporting, using actual data to replace estimates.
Emissions associated with joint ventures and investments are not 2 Grey fleet refers to colleague and hired road vehicles being used for a business
included in this disclosure as they fall outside the scope of our purpose. Emissions in tonnes CO 2 e in line with the c (2004). We are reporting to
operational boundary. The Group does not have any emissions the revised Scope 2 guidance, disclosing a market-based figure in addition to
the location-based figure. The methodology to derive reported Scope 1, 2 and 3
associated with imported heat, steam or imported cooling and
emissions is provided in the Lloyds Banking Group Reporting Criteria statement
is not aware of any other material sources of omissions from available online at www.lloydsbankinggroup.com/who-we-are/responsible-
our reporting. business/downloads.
Scope 1 emissions are emissions from activities for which the Group is responsible,
including mobile and stationary combustion of fuel and operation of facilities.
Scope 2 emissions are emissions from the purchase of electricity, heat, steam, or
cooling by the Group for its own use and have been calculated in accordance with
GHG Protocol guidelines, in both location and market-based methodologies.
Scope 3 emissions include elements within the Group’s own operations such as
emissions from waste, colleague commuting and business travel (including taxis,
tube, well to tank emissions of business travel and hotels).
Indicator is subject to Limited ISAE3000 (revised) assurance by Deloitte LLP for the
2021 Annual Responsible Business Reporting. Deloitte’s 2021 assurance statement
and the 2021 Reporting Criteria are available online at www.lloydsbankinggroup.
com/who-we-are/responsible-business/downloads.
 Lloyds Banking Group Annual Report and Accounts 2021 133

Energy efficiency Each of the current Directors who are in office as at the date of this
While COVID-19 has had an impact on our energy performance report, and whose names and functions are listed on pages 72
year on year, we have also seen consumption reduction driven to 73 of this annual report, confirm that, to the best of his or her
by our continued energy efficiency initiatives. This workstream knowledge:
includes an energy optimisation programme that implements
onsite optimisation and strategic alterations of Building • The Group and the Company financial statements, which have
Management System (BMS) and controls systems to match the run been prepared in accordance with international accounting
hours of plant to core operating hours and ensures temperature standards in conformity with the requirements of the
settings are aligned with Group comfort guidelines. In 2021, Companies Act 2006 give a true and fair view of the assets,
45 deep-dives, 80 onsite optimisations, 9 remote optimisations liabilities, financial position and profit or loss of the Group and
and 531 bank holiday programming were completed, which the Company
resulted in a 101.5 GWh saving. We have also run a programme • The management report contained in the strategic report and
of LED lighting upgrades and improved building controls the Directors’ report includes a fair review of the development
throughout our estate, leading to an estimated 1,280 MWh and performance of the business and the position of the Group
electricity saving. and the Company together with a description of the principal
risks and uncertainties they face
Independent auditor and audit information • The Annual Report and Accounts, taken as a whole, are fair,
balanced and understandable and provides the information
Each person who is a Director at the date of approval of this report necessary for shareholders to assess the Company and the
confirms that, so far as the Director is aware, there is no relevant Group’s position, performance, business model and strategy.
audit information of which the Company’s auditor is unaware and
each Director has taken all the steps that he or she ought to have The Directors have also separately reviewed and approved the
taken as a Director to make himself or herself aware of any relevant strategic report.
audit information and to establish that the Company’s auditor is
aware of that information. This confirmation is given and should be On behalf of the Board
interpreted in accordance with the provisions of the Companies
Act 2006.

Governance
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report, Kate Cheetham
including the Directors’ remuneration report, and the financial Company Secretary
statements in accordance with applicable law and regulations. 23 February 2022
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors Lloyds Banking Group plc
are required to prepare the Group and parent Company financial Registered in Scotland, No. SC095000
statements in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006.

Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and the Company
and of the profit or loss of the Company and Group for that
period. In preparing these financial statements, the Directors
are required to properly select and apply accounting policies;
present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information; provide additional disclosures when compliance with
the specific requirements in international accounting standards in
conformity with the requirements of the Companies Act 2006 are
insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the entity’s financial
position and financial performance; and make an assessment of
the company’s ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting

records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and the Group and enable
them to ensure that the financial statements and the Directors’
remuneration report comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company
and the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

A copy of the financial statements is placed on our website at

www.lloydsbankinggroup.com/investors/financial-downloads.
The Directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.