Financial Conduct Authority  

FCA threatens action against Lloyds bosses

FCA threatens action against Lloyds bosses

The financial regulator has threatened further action against the bosses at Lloyds Banking Group after a review found the bank did not fairly compensate victims of the HBoS Reading fraud scandal. 

Yesterday (December 10) Lloyds chief executive António Horta-Osório said he was "very sorry" some customers may not have received fair redress as a result of flaws in the bank's compensation scheme.

The scandal crippled small businesses in financial distress and Lloyds has since paid more than £102m to victims.

Six people were convicted and sentenced to up to 12 years in prison for their part in the HBoS Reading fraud which saw £245m in loans approved that could never be repaid between 2002 and 2007.

Following an independent review of the bank's compensation scheme, led by law professor Sir Ross Cranston and published yesterday, the Financial Conduct Authority warned it was "disappointed" the consequences of the fraud had not yet been properly remedied for customers. 

The watchdog said: "While finding that some aspects of LBG’s approach were reasonable, Sir Ross has found serious flaws in important aspects of the approach taken by LBG, including failures to adequately assess claims for direct and consequential losses, the exclusion of some customers from the review and inconsistency in the way some customers were treated in respect of claims for distress and inconvenience. 

"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." 

The FCA said it expects senior management at Lloyds to explain how and why the failings occurred and threatened further action depending on the answers. 

The bank said it "deeply regrets" customer concerns had not been "adequately addressed" and promised to implement Sir Ross' recommendation to offer all customers the option of a re-review of their cases.  

Yesterday Mr Horta-Osório said: "I want to emphasise my personal commitment to ensuring that those customers affected by the actions of individuals who have since been jailed for their crimes will get their claims properly addressed in an open and transparent manner."

An additional independent review led by Dame Linda Dobbs is still ongoing into whether the issues relating to HBoS Reading were appropriately investigated and reported to authorities at the time by Lloyds, following its acquisition of HBoS in 2009.

Last year the Treasury select committee was told Dame Linda's report was unlikely to be finished until the second half of 2019. 

rachel.mortimer@ft.com 

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