Bank of Scotland plc

In June 2019 the FCA fined Bank of Scotland £45.5 million for failing to be open with the regulator about suspected fraud at HBOS's Reading-based Impaired Assets office, where a team led by Lynden Scourfield had been pushing struggling small businesses towards outside consultants who stripped their assets for personal gain. The bank first identified suspicious behaviour in early 2007 — including that Scourfield had been approving lending beyond his authority for three years — but did not fully disclose its suspicions to the then regulator, the Financial Services Authority, until July 2009, and the FCA found there was insufficient challenge or scrutiny "from top to bottom" of the organisation. The FCA said the delay hampered investigations by both the regulator and Thames Valley Police. The bank agreed to settle and received a 30% discount, cutting the fine by almost £20 million; the FCA also banned four individuals involved in the fraud.

On 4 June 2015 the Financial Conduct Authority fined Lloyds Bank plc, Bank of Scotland plc and Black Horse Limited (LBG) £117,430,600 for breaching Principle 6 (Customers’ interests) in their handling of Payment Protection Insurance (PPI) complaints between 5 March 2012 and 28 May 2013. The FCA found LBG assessed complaints on more than 2.3 million PPI policies and rejected 37%, using an “Overriding Principle” that assumed sales processes were compliant, failing to take root‑cause analysis into account and sometimes issuing rejection letters that may have discouraged customers from pursuing valid complaints. LBG agreed an early settlement and received a 30% (Stage 1) discount; without that discount the penalty would have been £167,758,035.

On 28 July 2014 the Financial Conduct Authority imposed a combined £105,000,000 penalty on Lloyds Bank plc and Bank of Scotland plc for manipulating submissions to two benchmark rates (the Repo Rate and LIBOR), in breach of Principles 3 and 5. The penalty was split equally between the two firms (so £52,500,000 each) and was discounted from £150,000,000 for early settlement. Principle 5 requires firms to observe proper standards of market conduct; Principle 3 requires firms to take reasonable care to organise and control their affairs responsibly. The FCA final notice is linked below; the register entry does not state the exact period of the misconduct.

The FCA fined Lloyds TSB Bank plc and Bank of Scotland plc £28,038,800 on 10 December 2013 for breaches of Principle 3 (firms must take reasonable care to organise and control their affairs responsibly and effectively, with adequate risk management systems). Between 1 January 2010 and 31 March 2012 the banks had serious failings in systems and controls over sales incentives for branch advisers: pay structures (variable salaries, bonus thresholds) and a bias towards protection products created a material risk of inappropriate advised sales. Monitoring and governance were inadequate (including a flawed competency control that allowed advisers with identified sales issues to receive pay rises/bonuses) and senior management collectively failed to give incentives robust oversight. The firms settled early and received a 20% settlement discount (Stage 2), and are reviewing sales by higher‑risk advisers and will provide customer redress where appropriate.

On 15 February 2013 the FSA (the FCA's predecessor) imposed a single Final Notice fining Lloyds TSB Bank Plc, Lloyds TSB Scotland Plc and Bank of Scotland Plc (together Lloyds Banking Group) £4,315,000 for failing to pay PPI redress promptly during 5 May 2011–9 March 2012. The firms had sent 582,206 decision letters agreeing redress but failed to make payment within 28 days in up to 140,209 (24%) cases; 24,589 payments inadvertently dropped out of the process and required remedial action. The FSA found breaches of Principle 3 (must organise and control affairs responsibly and effectively) and DISP 1.4.1R(5) (must comply promptly with accepted offers of redress); Lloyds settled early and received a 30% executive‑settlement discount (the fine would otherwise have been £6,164,327), carried out a full reconciliation, paid interest where appropriate and implemented process fixes including a PPI payment validation tool.

On 19 October 2012 the FSA issued a Final Notice fining Bank of Scotland plc £4.2m for holding inaccurate records for about 250,000 Halifax mortgage customers. The errors arose because mortgage information was held on two unsynchronised systems (with manual updates in some cases), so customers missed important updates to mortgage terms between 2004 and 2011 and some were wrongly excluded from a redress programme (a Voluntary Variation of Permission). The errors led the firm to contact 33,700 customers who should not have been included and to make £20.4m of goodwill payments to 22,700 of them; the FSA reduced an initial proposed penalty of £6m to £4.2m after applying a Stage 1 discount. The breach was of Principle 3 (firms must take reasonable care to organise and control their affairs).

On 9 March 2012 the FSA issued a Final Notice publicly censuring Bank of Scotland plc for breaching Principle 3 of the FSA’s Principles for Business during January 2006 to December 2008. Principle 3 requires firms to take reasonable care to organise and control their affairs responsibly and effectively, with adequate risk‑management systems. The FSA found the bank’s Corporate Banking Division pursued an aggressive growth strategy in high‑risk, sub‑investment grade lending without taking reasonable steps to assess, manage or mitigate the risks, maintained weak controls and oversight as markets deteriorated in 2007, and between April and December 2008 failed to take reasonable care over high value transactions showing signs of stress. The FSA said a financial penalty would have been merited and substantial but, in the exceptional circumstances of the case, decided not to impose one and issued a public censure instead.

On 25 May 2011 the FSA fined Bank of Scotland plc £3.5m for breaches of Principle 3 (management and control) and Principle 6 (customers' interests) arising from failings in its complaint‑handling arrangements between 30 July 2007 and 31 October 2009. The firm agreed an early settlement and received a 30% stage‑1 discount (the headline sanction would otherwise have been £5m). The FSA found a significant number of complaints about BOS’s investment advice were wrongly decided: BOS reviewed a sample of 275 rejected complaints and overturned 45% (of those it will now uphold, 77% were by inexperienced customers and 55% were aged over 60), and the FSA’s own review reached consistent findings. During the Relevant Period BOS received 2,592 complaints; it has paid £2.4m in compensation to date, the FSA expected further compensation of around £15m, and BOS agreed to review all rejected complaints from 1 Feb 2004 to 31 Dec 2009 and to target a review of sales to 8,000 customers classed as ‘cautious’, proactively paying compensation where due and improving its sales and complaints processes.

The FSA fined The Governor and Company of the Bank of Scotland £1,250,000 on 12 January 2004 for widespread failures in keeping customer identification records. A 2002 internal review found a 55% failure rate across the Retail, Corporate and Business divisions; the FSA’s investigation concluded the bank breached ML 7.3.2 (firms must retain a copy of customer identification evidence or a record of where it can be obtained) and ML 2.1.1 (firms must set up and operate arrangements to ensure they comply with the Money Laundering rules). The FSA noted the failings dated back at least to 2000, accepted that the bank promptly implemented remedial plans and co‑operated with the investigation, and said those factors reduced the size of the penalty.

The Governor and Company of the Bank of Scotland was fined £750,000 by the Financial Services Authority (FSA) in a Final Notice dated 5 February 2003 for failures in its PEP and ISA Department. Between November 1999 and August 2001 the firm’s implementation of its LISA PEP and ISA computer system, and the transfer of PEP customers’ accounts into that system (together with management failings), meant it could not reconcile the cash it held for PEP and ISA customers or state accurately how much customer money it held.