LONDON — Lloyds Banking Group said on Friday it expects to pay out an extra £100 million to compensate victims of a small-business lending fraud.
On the same day, the UK’s markets watchdog said it would probe how much former HBOS executives knew of the corrupt practices.
The fraud, which saw six people jailed earlier this year for almost 48 years following a six-year Thames Valley Police investigation, has already cost Lloyds around £250 million and left small business owners struggling.
The fraud occurred at HBOS between 2003 and 2007. Lloyds merged with HBOS during the financial crisis.
Lloyds CEO Antonio Horta-Osório said in a statement on Friday: “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,” Horta-Osoria said.
“We take responsibility for putting right the wrongs that were committed at HBOS Reading at the time. That is why today we are providing an additional package of measures to ensure that customers have all the help they need as we resolve their cases as quickly as possible,” he said.
Between 2003 and 2007, HBOS managers were involved in a scam which saw them and a firm of consultants profit from driving small businesses into financial distress with loans.
Lynden Scourfield, who ran the HBOS impaired assets division, pleaded guilty to six counts including corruption.
He lent huge amounts of money to troubled businesses and then referred them to Quayside Corporate Services in return for cash and gifts, while the consultants made large sums in fees from the struggling companies. The total losses to the bank from the soured loans amount to around £245 million.
Detective Superintendent Nick John, the senior investigating officer said at the time: “This has been the longest and most complex case in Thames Valley Police’s history.”
The Financial Conduct Authority said it would reopen its investigation into the HBOS fraud “focusing on the extent and nature of the knowledge of these matters within HBOS and its communications with the Financial Services Authority after the initial discovery of the misconduct.”
The Sunday Times last week alleged in a report that HBOS executives had been aware of the fraud as early as 2008 and had attempted to cover it up.
HBOS, which owned the Halifax and Bank of Scotland brands, suffered heavy losses in the 2008 financial crisis and neared collapse as its funding was cut off by the credit crunch.
It had to be rescued by a combination of a public bailout and a merger with Lloyds TSB, costing the taxpayer around £20 billion in the early part of 2009.
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