Lloyds Probe Resumed by FCA After HBOS Bankers Put in PrisonBy and
Investigation was put on hold pending a criminal police probe
Inquiry focuses on how much HBOS knew and FCA communications
Lloyds Banking Group Plc is back under investigation from U.K. regulators over misconduct at its HBOS unit, after authorities reopened a probe put on hold pending the outcome of a criminal case that resulted in six people going to prison.
The investigation focuses “on the extent and nature of the knowledge of these matters within HBOS and its communications” with regulators “after the initial discovery of the misconduct,” the U.K.’s Financial Conduct Authority said in a statement Friday. Lloyds said in a separate statement it would set aside 100 million pounds ($124.4 million) in first quarter earnings to compensate victims.
Two former HBOS bankers in February were sentenced to as long as 11 years in prison after a London judge said they had sold their souls “for sex, luxurious trips, for bling” in a scheme that siphoned millions from ailing businesses and cost the bank about 250 million pounds. The men were among six people convicted by jurors for fraud and money laundering.
“We would like to express our deep regret and apologies to any customers directly affected by the criminal behavior of these individuals,” Lloyds Chief Executive Antonio Horta-Osorio said in a statement. “We take responsibility for putting right the wrongs that were committed at HBOS Reading at the time.”
HBOS was the subject of one of the most controversial episodes of Britain’s financial crisis that led to a state-brokered takeover by Lloyds in 2009 and a 20.3 billion-pound taxpayer bailout. The U.K. is on course to return Lloyds to full private ownership for a profit within the coming weeks, as it cut its stake in the bank to less than 2 percent earlier this week.
Lloyds said the 100 million pounds it’s setting aside will help compensate customers for economic losses, distress and inconvenience. The bank appointed Russel Griggs, a senior Scottish financier, to carry out an independent review last month and said it would provide “fair, swift and appropriate” compensation to any HBOS customers that were victims of the fraud at its Reading, England-based impaired assets unit.
The FCA said its probe had been put on hold in early 2013 “at the request of Thames Valley Police pending the outcome” of their investigation and resulting prosecutions.