Lloyds Fined $58 Million by FCA Over Decade-Old HBOS Scandal
Lloyds Fined $58 Million by FCA Over Decade-Old Scandal at HBOS
(Bloomberg) --
Lloyds Banking Group Plc’s Bank of Scotland unit was fined 45.5 million pounds ($58 million) by the U.K.’s finance regulator over a scandal at the bank’s Reading division that siphoned millions from failing businesses a decade ago.
The company “failed to alert the regulator and the police about suspicions of fraud at its Reading branch when those suspicions first became apparent,” the Financial Conduct Authority said in an emailed statement on Friday. The watchdog also banned four people from working in financial services, including a pair of former HBOS bankers, all of whom were convicted of fraud related to the affair.
The fine ends an episode that cost HBOS financially as well as hurt its reputation. Edinburgh-based HBOS was the subject of one of the most controversial episodes of Britain’s financial crisis. After a state-brokered takeover by the former Lloyds TSB in 2009, the combined entity ultimately required a 20.3 billion-pound taxpayer bailout.
Mark Dobson and Lynden Scourfield, two of the four banned by the FCA, were sentenced in 2017 by a London judge to four and a half years and 11 years respectively in prison for selling their souls “for sex, luxurious trips, for bling.” The pair were condemned for their involvement in the scheme to gouge struggling small businesses with high consulting fees and load them with excess debt.
“There is no evidence anyone properly addressed their mind to this matter or its consequences,” Mark Steward, executive director of enforcement and market oversight at the FCA, said in Friday’s statement. “The result risked substantial prejudice to the interests of justice, delaying scrutiny of the fraud by regulators, the start of criminal proceedings as well as the payment of compensation to customers.”
HBOS was chided for not recognizing information that pointed to fraud earlier and its failures caused delays to the investigations by both the FCA and Thames Valley Police, the FCA said.
Lloyds said in a statement that it cooperated with the FCA, has learned lessons from the experience, and has worked to ensure tighter controls and risk management.
“2007-2009 was a dark period in HBOS’s history,” Lloyds Chief Executive Officer Antonio Horta-Osorio said in the statement. “I want to apologize once again for the very deep distress caused to the customers affected by the HBOS Reading fraud.”
The FCA said the bank agreed to resolve the matter and qualified for a 30% discount, cutting its fine from 65 million pounds.
To contact the reporter on this story: Hugo Miller in Geneva at hugomiller@bloomberg.net
To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Peter Chapman, Keith Campbell
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