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05 July 2017 - HBOS took £240m hit after HBOS fraud
Halifax Bank of Scotland (HBOS)
Source -
Where - United Kingdom
Cost - 240,000,000 GBP
Business line - Commercial Banking

HBOS took a £240m hit as a result of the Reading branch scandal, according to figures released by the UK’s Financial Conduct Authority this week.

The figure was initially kept under wraps by the regulator because of an ongoing investigation by Thames Valley police which began in 2010 and was concluded in a trial earlier this year.

Six individuals were jailed for the fraud at HBOS which swindled hundreds of businesses and the bank out of millions. HBOS Reading executive Lynden Scourfield colluded with financial consultant David Mills to force businesses into liquidation for their own financial benefit. The case – mainly due to Mills’ and Sourfield’s extravagant lifestyles at the expense of their victims – was widely publicised.

The paragraphs redacted from comments made by the FCA in the 2012 report highlight the huge control issues at HBOS. They read: “A serious control breakdown in corporate’s Reading office was discovered in March 2007. A senior member of staff had been sanctioning limits and additional facilities beyond the scope of his delegated lending authority undetected for at least three years.

“The additional facilities were provided to distressed companies, and involved the use of a workout firm that had a potentially inappropriate link with the member of staff. This unauthorised extension of credit may have exposed the firm and the firm’s customers to potential fraud.”

According to the FCA’s figures, HBOS took a £76m bad debt provision in the first half of 2007 which had increased to £240m by the end of the year.

In a statement released after the FCA published the unredacted version of the HBOS report, Lloyds Bank (now owner of HBOS) said “once again we apologise and express our deep regret to customers”.

The FCA is now trying to get to the bottom of whether individuals at the top were aware of the misconduct occurring at HBOS Reading and Lloyds is still conducting an investigation into how it handled the issue when it took over the firm in 2008.