Bank launches customer review after HBOS corruption case

Lloyds Banking Group is to review all customer cases that may have been affected by a corruption scam involving managers at its HBOS subsidiary.

It said it would "provide redress if appropriate" to those affected by criminal activity linked to the fraud.

Two former HBOS managers were among six people jailed last week over the £245m scam, which saw inappropriate loans approved for struggling businesses in exchange for designer watches, exotic holidays and sex parties.

Many of the firms involved went bankrupt and some of the owners lost their homes while there were big fees for consultant David Mills, who ran Quayside Corporate Services (QCS) and was at the centre of the bribery.

Lloyds said: "Customer cases will be considered afresh in light of all relevant evidence including new evidence that emerged during the trial.

"The group deeply regrets that the criminal actions have caused such distress for a number of HBOS business customers."

It comes days after a group of MPs (BSE: MPSLTD.BO - news) wrote to Lloyds bosses demanding "proper compensation" for defrauded businesses.

Nikki and Paul Turner, a Cambridge couple who helped uncover the affair after falling foul of the fraud operation, cautiously welcomed the bank's announcement though they said it followed "years of denial".

Lloyds said it would "undertake a review of all customer cases which may have been affected by criminal activities" linked to the office at the centre of the scam in Reading.

This is thought likely to mean the bank contacting just under 50 businesses - some of them who were referred by the convicted former HBOS staff to QCS, and others who were customers managed by QCS though not referred to by those staff.

The review will also be opened up to others not in these groups who can raise concerns if they feel they may have been affected by the criminal activity - thought to be a small number.

Lloyds said that in consultation with the Financial Conduct Authority (FCA) it would appoint an independent third party to take part in the review.

The group has yet to determine the scale of any compensation it may have to offer as a result of the process and would report this to investors if it is thought to have a "material" impact on results.

The FCA welcomed the announcement, saying: "While the FCA still needs to see further detail about how the scheme will operate, we believe that it is an important step for LBG to put in place an appropriate review process."

The Lloyds announcement comes after six people were jailed at Southwark Crown Court over a scam centred on David Mills and involving HBOS staff Lynden Scourfield and Mark Dobson, running from 2003 to 2007.

Scourfield, who had been in charge of helping business customers who were facing financial difficulties, was jailed for 11 years and three months.

Mills was sentenced to 15 years and Dobson to four-and-a-half years while three other defendants also received prison sentences.