Daniels’ decision comes after Royal Bank of Scotland chief executive Stephen Hester waived his £1.6m bonus yesterday.
Last week Barclays chief executive John Varley and president Bob Diamond waived their bonuses.
Lloyds chairman Sir Winfried Bischoff says while Daniels “merits” the full payout under the company’s annual bonus scheme, he will not be taking it for the second consecutive year.
He adds: “Mr Daniels has taken this action because he believes that the excellent progress the group is making, based on the considerable contribution of many colleagues across the company, is in danger of being obscured by the current debate on executive bonus awards in the banking sector. The Board has accepted Mr Daniels’ decision and greatly appreciates the leadership shown by his action.”
Elsewhere across the group, Bischoff says annual bonus awards will be paid, where appropriate, in shares and subject to deferral and clawback.