Lloyds Banking Group plc (LON:LLOY) said today it will set aside £100mln to compensate victims of fraud at its HBOS subsidiary.
The fraud involved two former bankers at the HBOS Reading branch who helped siphoned off money from struggling businesses, which were clients of the business.
Six people were jailed earlier this year over the case, which is estimated to have cost victims £245mln.
Lloyds, which bought HBOS in a rescue deal during the 2008 financial crisis, said it will also provide interim payments on a case-by-case basis to help customers in financial difficulty as a result of the fraud.
Chief executive, António Horta-Osório, 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.”
The bank will appoint a senior independent lawyer to consider whether the bank properly investigated at the time.
Victims of the scandal have accused the lender of reacting too slowly to their complaints and Lloyds has been under mounting pressure to provide compensation.
Lloyds, which is still 1.97% owned by the taxpayer, has said it has written to the majority of customers affected by the fraud since announcing a review in February.
The bank appointed Professor Russel Griggs last month to conduct an independent review on compensation for victims of the HBOS scandal.
FCA resumes HBOS probe
The UK’s Financial Conduct Authority announced it was resuming its investigation of the case after placing its probe on hold 2013 as it awaited the outcome of the police's inquiry.
The FCA, which began its investigation in 2010, said the review would focus on the extent to which HBOS knew about the issue and its communciations with former City watchdog, the Financial Services Authority.
The regulator's announcement follows reports that two former employees of HBOS face prosecution for allegedly covering up the fraud for nine years.
The Sunday Times reported the employees had allegedly tried to mask the estimated £1bn fraud at the HBOS Reading branch as the bank struggled financially.
PPI provisions
In a separate legacy issue, Lloyds said last month it was putting aside a further £350mln to cover claims for mis-sold payment protection insurance (PPI) after the FCA moved its deadline for new complaints.
The FCA has moved its cut-off date for new PPI complaints to August 2019 from a previous deadline of June 2019.
At the full year results in February, Lloyds said it had PPI provisions of £1.0mln, though it was less than the £4.0mln it had the previous year.
Shares in Lloyds were down 0.61% to 63.20 at the midday mark.
-- Adds details of HBOS case, adds background --