Lloyds Banking Group is under heavy criticism after a reported it mistreated the victims of one of Britain's biggest banking scandals as the regulator threatens with actions.
A report by Sir Ross Cranston assessing the bank's customer review, which was set up to compensate victims of the HBOS Reading fraud, found the review "did not achieve the purpose of delivering fair and reasonable offers of compensation".
Lloyds CEO, António Horta-Osório, was forced into a humiliating apology after major flaws were found.
I am very sorry that this has happened"
"Our intention…was to deliver fair and reasonable outcomes for customers in a swift way that would be more generous than through the courts. Sir Ross has concluded that customers may not have received fair outcomes due to flaws in the review process. I am very sorry that this has happened," he said.
The fraud at Halifax Bank of Scotland's Reading branch led to six people being jailed in 2017 for a combined 47 years.
Criminal banker Lynden Scourfield and his cronies deliberately wrecked dozens of struggling small businesses, spending the profits on prostitutes, holidays and luxury goods. At Scourfield's trial, jurors were told the fraud was worth £245m, but victims and police sources said the cost to small firms ruined by the scam was up to £1bn.
The bank's compensation scheme for victims had ‘serious shortcomings', retired judge Ross Cranston said in a review. Cranston also criticized Lloyds for excluding some victims from the scheme and said the bank should assess further cases.
The bank has paid £102 million in compensation to 71 businesses and 191 directors over the fraud. Additionally Lloyds said it would offer all victims the option to have their cases independently reviewed.
Watchdog the Financial Conduct Authority said it would consider "further action" against Lloyds over the failings, adding that they needed to be addressed quickly.
The FCA said: "We are disappointed that, after such a long period of time, the consequences of the HBOS Reading fraud for customers have not yet been properly remediated by LBG."
The watchdog added: "These failings need to be addressed by LBG quickly. Sir Ross has made a number of recommendations to achieve that and we will ensure LBG implements them in full as soon as possible.
"We will also require LBG senior management to explain how and why the failings identified by Sir Ross occurred in the first place. We will consider what further action may be required in light of those answers."