Lloyds Banking Group has said staff will continue to be rewarded based on customer service and sales metrics, contrary to reports it is scrapping incentives linked to product sales.

Reports in the Financial Times said Lloyds was replacing incentives linked to product sales in an “attempt to clean up bad practices that have been blamed for causing mis-selling scandals”.

The Financial Services Authority’s conduct division has told banks, brokers and insurers to get rid of bonus schemes that reward sales volumes over suitability, which it claimed encouraged employees to mis-sell products such as payment protection insurance (PPI).

A spokesperson for Lloyds told meetpie.com: “The majority of our employees in our branches are still working under our ‘regular’ incentives scheme - which has metrics for both sales and service."

However Lloyds has confirmed that a new pilot scheme, which has a focus on customer retention, is being trialled in around 70 branches. While there are no individual sales targets, sales are still monitored on a branch or area level. Incentives schemes are reviewed on a quarterly basis.

The FT reported that Barclays has said it will stop using incentives for its retail staff, while HSBC and Royal Bank of Scotland are reviewing the situation. Most lenders are now introducing conditions to ensure bonuses are not awarded unless minimum customer satisfaction targets are met.

The compensation bill facing the UK's five big banks for mis-sold PPI is expected to reach £10bn.