Lloyds Banking Group PLC (LON:LLOY) is to launch a review of customers who were victims of a fraud committed by former HBOS employees to determine whether or not it should pay compensation.
The government-backed lender – which acquired HBOS back in 2008 – has said it will appoint an independent consultancy to assess the complaints of the small businesses affected by the actions of two ex-HBOS employees and four financiers who were jailed last week.
The move comes after pressure from MPs earlier in the week to pay compensation to the victims.
Lloyds said it is working with the Financial Conduct Authority to appoint the third-party consultancy.
The review is expected to last six months and, depending on the outcome, could see Lloyds pay out compensation despite the offences being committed before it acquired HBOS.
Lloyds has been criticised for its perceived slow reaction in dealing with the customer complaints.
The scandal dates back to 2003, when Lynden Scourfield was head of a division at HBOS that dealt with small companies in financial trouble.
In return for bribes including prostitutes and cash-filled brown envelopes, he referred a number of his business clients to David Mills’ Quayside Corporate Services.
These small companies essentially had no choice; without signing up to QCS’s services, they wouldn’t be able to access additional credit from HBOS.
QCS was supposed to be turnaround consultants, helping the small firms work their way out of debt.
Instead, Mills and his associates would then charge those clients huge, in some cases unmanageable, fees forcing them further into the red.
The corruption forced HBOS to write off around £250mln in loans that were not repaid.
Shares in Lloyds were up 0.5% to 66.4p early on Tuesday afternoon.