FCA reopens HBOS fraud probe as Lloyds increases compo provision

Edinburgh-based Lloyds had already set aside at least £250m to cover other costs arising from the case, which was centred on the HBOS office in Reading.

Six people, one HBOS banker and five other financiers, two of whom had worked for Halifax Bank of Scotland (HBOS) which is owned by Lloyds - were jailed in February for their part in the £245 million loans scandal.

The group was found to have siphoned off funds and spent the profits on prostitutes, luxury holidays and a range of expensive items.

Lynden Scourfield was sentenced to 11 years and three months, while consultant David Mills was jailed for 15 years.

Michael Bancroft, 73, was jailed for 10 years; Mark Dobson, 56, another former HBOS manager, was sentenced to four and a half years. The two were jailed on counts including bribery and money laundering.

Alison Mills, 51, and John Cartwright, 72, were given three and a half year sentences for money laundering.

Responding to this week’s move by Lloyds to increase its compensation provision, City watchdog the Financial Conduct Authority (FCA) today announced that it is re-opening its investigation into events surrounding the discovery of misconduct within the Reading-based Impaired Assets team of HBOS.

The FCA investigation had been put on hold in early 2013 at the request of Thames Valley Police pending the outcome of the investigation that resulted in the criminal prosecutions.

The FCA said its revived investigation “is focusing on the extent and nature of the knowledge of these matters within HBOS and its communications with the Financial Services Authority after the initial discovery of the misconduct.”

“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,” said António Horta-Osório, the chief executive of Lloyds Banking Group.

“We are absolutely determined that victims of the crimes committed at HBOS Reading are fairly, swiftly and appropriately compensated. We take responsibility for putting right the wrongs that were committed at HBOS Reading at the time.”

Lloyds also said that it will appoint an independent lawyer to determine whether the bank investigated the crime properly at the time.