A censure has been issued instead of a fine as the FSA felt levying a fine would mean the taxpayer paying twice for the same action.
The decision is the result of an enforcement investigation into failings within the Bank of Scotland corporate division from January 2006 to December 2008.
The firm, a subsidiary of HBOS, was judged to have failed to take “reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.”
The FSA described the corporate division as pursuing an ‘aggressive growth strategy that focused on high-risk, sub-investment grade lending’ which was highly vulnerable during the economic downturn.
Yet, rather than re-evaluate the business during the downturn Bank of Scotland focused on increasing its revenue and its market share as other lenders pulled out of the market.
Tracey McDermott, FSA acting director of enforcement, said: “Banks and other firms have to manage their business by ensuring that their systems and controls are appropriate for the risks they are running.
“The conduct of the Bank of Scotland illustrates how a failure to meet regulatory requirements can end not just in massive costs to a firm, but losses to shareholders, taxpayers and the economy.”
A public report of the failure will be conducted once the enforcement proceedings are complete.