Banking snake-oil purveyors force to disgorge some of their profits.

Lloyds Banking Group is to claw back almost half of the bonus paid to its former chief executive in 2010 because of the bank's role in the mis-selling of payment protection insurance (PPI).

Former CEO Eric Daniels will be stripped of 40% of the £1.45m payout he was given two years ago. He will have to give back £580,000, but still leaving a bonus of £870,000.

In total, the state-backed bank will strip 13 of its executives of the bonuses they were awarded following the scandal that cost it £3.2bn in compensation claims last year. In a classic case of bankers' double-speak and PR gobbledegook, Lloyds said the decision was based on the principle of "accountability".

A statement from the bank said: "The board wishes to emphasise that its decision is based entirely on the principle of 'accountability' and in no way on culpability or wrong-doing by the individuals concerned."

Of course, why on earth would anyone think any different? That's what happens when you don't do anything wrong or culpable, you have to cough up a load of loot which your institution acquired by conning ordinary people into buying a series of financial products which were no use to them. The bank have got to trot out this bromide because if it was thought to be anything else, like, saints preserve us, a crime, then it might open some very grimy doors indeed!

Other directors will have either 25% or 5% of their 2010 bonuses taken back, resulting in losses of between about £100,000 and £250,000 each. The bank will announce further claw-backs for the 2011 bonus season on Friday.

This decision will put pressure on Royal Bank of Scotland, which is 82% state-owned and was the second largest player in the PPI market behind Lloyds, to take similar claw-back measures. It will be instructive to see what happens. Lloyds' earnings are expected to be hit by the losses incurred from the PPI scandal when announced later this week.

It is the first example of a big British bank taking back bonuses since 'claw back' options were introduced in executive pay packages in the wake of the 2008 financial crisis. The decision follows pressure from the toothless and barkless banking watchdog, the Farcical Supine Authority, to retract some of the bonus pay-outs for executives in charge during the scandal which has cost the industry more than £9bn in compensation claims.

It is the first example of the FSA demonstrating it has the powers to clamp down on failures by banking executives. But frankly, it is nothing to shout about, because it is far too little, and far too late, and in any event, the FSA should not be just taking back what the bank executives should not have received in the first place. PPI was a product most often sold alongside loans and mortgages by banks, ostensibly to cover repayments if borrowers fell ill or lost their jobs. But it was found to be completely worthless insurance for too many customers, opening the way for a flurry of compensation claims by buyers. Not content with having fleeced their customers, the banks then mounted a hugely expensive and cynical court case to try and avoid the consequences of their actions. In April last year, the banks lost the case in the High Court to stop customers demanding compensation.

Let us be clear, any money which is realised as a result of a fraud being practised on any person, is the proceeds of a crime, and the PPI episode was nothing more than an institutionalised exercise in wholesale fraud. The FSA should even now be deciding who is going to be charged with conspiracy to defraud as a result of this case. Except the problem is that the practice was so huge and so widespread, and so many people in our rotten retail banking system were involved in the fraud, from the people at the front counter who flogged these dodgy policies, to their managers who urged them on to meet meaningless sales targets, to the executives who connived at these dishonest practices, all the while watching the profits piling up on their balance sheets.

I make no apology for calling our High Street retail banking system 'rotten', because for too long, the ordinary client has been treated as a dupe and a sucker, while his financial needs have been exploited and abused, whether in pensions provision, where his funds have been diminished by a whole series of secret and opaque costs and charges; or a series of so-called mis-selling scandals, occupational pensions, PPI insurance, whatever you call it, they've flogged it!