FOR far too long the pay packages of senior executives in banking have been a one-way bet.

Huge bonuses were all but guaranteed. After the 2008 crash, there was outrage when it emerged that thousands of bankers had walked away with multi-million pound bonuses for the previous year, despite causing historically high losses.

As a result the Financial Services Authority required banks to make provision for bonuses to be "clawed back" if the decisions taken by their senior people go bad. Bonuses were also to be paid predominantly in shares, redeemable in the future, to facilitate such clawbacks. The decision by Lloyds Banking Group to take back £2m in bonuses from 10 senior bankers involved in the PPI (payment protection insurance) scandal is the first instance of that deterrent in action and as such it is welcome. It was fundamentally unjust that bankers could cause financial devastation to the lives of others but escape without penalty.

Even so, £2m is a flea bite, compared with the £3.2bn loss suffered by the bailed-out bank as a result of misselling PPI, a loss that will be borne partly by taxpayers. With the banking group expected to announce losses on a similar scale later this week, many may wonder why these men and women are entitled to any bonus, especially when, partly in anticipation of lower bonuses, senior bankers' salaries have risen sharply in the interim. And why is only a small handful of senior executives to be penalised when many others profited handsomely from selling products that did not meet the needs of customers? In April last year the High Court ordered high street banks to repay billions of pounds to the 2.5m customers who had been missold PPI.

Lloyds Banking Group's comparatively modest gesture may be designed to detract from its disappointing results and focus negative comment on past shortcomings. Also, it is cold comfort for the many thousands of Lloyds customers who bought these policies only to find they were worthless when holders fell on hard times and tried to claim on them.

The best that can be said is that this is a step in the right direction. Eyes will now be on 83%-state-owned RBS, which is also reporting hefty losses this week and which was the second largest player in the PPI market. It must surely follow suit.

So are bankers and their remuneration committees starting to "get it"? Certainly the new economic reality sits ill with a culture where the bar was set so low that the term bonus was a misnomer. Senior executives could rely on receiving six or even seven-figure sums on top of their salaries.

This is unacceptable per se and entirely unpalatable in banks rescued by taxpayers. In Spain the conservative government has capped executive pay in its nationalised banks at around £500,000 a year. It will be interesting to see if the senior team leaves and performance plummets, as those who defend egregious rewards in the sector confidently predict whenever pay caps are mooted.

It is easy to be cynical but it is noticeable that banks' annual reports are laying increasing stress on citizenship, their obligations to society and their charitable and community work. Misselling PPI has cost the banking industry £6bn. It came hot on the heels of another scandal over the misselling of mortgages backed by endowment policies. The message of this modest penalty is that actions have consequences. The days of "get in, get rich, get out" are over.