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Lloyds Banking Group is setting aside £100m for compensation for victims of fraud perpetrated by former HBoS employees, as the city watchdog re-opens its investigation into the scandal.
The bank, which is 2 per cent owned by the government, said on Friday it expects the cost of compensating businesses for “economic losses, distress and inconvenience” will amount to £100m, which will be included in its first quarter earnings results later this month.
The UK’s Financial Conduct Authority announced that it will resume its enforcement investigation into past misconduct at the Reading-based HBoS branch.
The watchdog’s review was put on hold in early 2013 at the request of Thames Valley Police as it undertook its own investigation.
The FCA said its review is focusing on the extent to which HBOS knew about the issue and its communications with the Financial Services Authority – the former City watchdog – after the initial discovery of the misconduct.
The debacle involved former HBOS manager Lynden Scourfield, who conspired with debt consultancy Quayside Corporate Services and other financiers, to load unmanageable amounts of debt and high fees on to small businesses, a court heard in January.
Earlier this year, Mr Scourfield, another former HBoS banker and four associates were jailed after being convicted of fraudulent trading, corruption and money laundering
Although the fraud took place before Lloyds acquired HBOS in 2008, Lloyds has come under mounting pressure from politicians and businesses for reacting slowly to customer complaints that surfaced at the time.
António Horta-Osório, chief executive of Lloyds, said: “As I have stated before, we would like to express our deep regret and apologies to any customers directly affected by the criminal behaviour of these individuals. We are absolutely determined that victims of the crimes committed at HBOS Reading are fairly, swiftly and appropriately compensated.”
Lloyds appointed professor Russel Griggs last month to independently review business customers who were victims of fraud. He is responsible for setting out the scope and process of the review of HBOS victims to determine whether they are eligible for compensation.
In addition to the compensation, Lloyds said it will provide interim payments for certain businesses in financial difficulty to help them with living costs, and will cover fees for taking legal and financial advice. The bank will write off victims’ relevant debts currently
Lloyds is also appointing a senior independent lawyer to consider whether the issues relating to HBOS Reading were investigated and reported to watchdogs at the time by the bank, following its acquisition of HBOS.
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