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(Adds FCA comment, further detail)
* Six jailed for fraud that targeted small businesses
* Bank's compensation scheme had 'serious shortcomings'
-report
* Bank apologises, says will implement recommendations
* Financial Conduct Authority considering 'further action'
By Iain Withers and Lawrence White
LONDON, Dec 10 (Reuters) - Lloyds Banking Group has
been heavily criticised for mishandling a compensation scheme
for victims of one of Britain's biggest banking scandals in a
report published on Tuesday.
The fraud at Halifax Bank of Scotland's Reading branch led
to six people being jailed in 2017 for a combined 47 years.
The scam involved small business customers being targeted
and referred to a consultancy in return for bribes which the
judge at the trial said included designer watches, sex with
prostitutes and foreign holidays.
The bank's compensation scheme for victims had 'serious
shortcomings', retired judge Ross Cranston said in a review.
The bank likely failed to properly compensate some victims
for financial losses arising from the fraud's impact on their
business, and showed an 'unacceptable denial of responsibility'
for victims' suffering, the review found.
The bank, which has paid 102 million pounds ($130.87
million) in compensation to 71 businesses and 191 directors over
the fraud, said it would offer all victims the option to have
their cases independently reviewed.
Cranston also criticised Lloyds for excluding some victims
from the scheme and said the bank should assess further cases.
Watchdog the Financial Conduct Authority said it would
consider 'further action' against Lloyds over the failings,
adding that they needed to be addressed quickly.
"We are disappointed that, after such a long period of time,
the consequences of the HBOS Reading fraud for customers have
not yet been properly remediated by LBG," the FCA added.
Politicians and campaigners have criticised Lloyds for its
handling of the fraud at HBOS, a business it bought in a
state-engineered takeover in 2009.
Cranston was appointed by Lloyds to assess its compensation
scheme for victims, after financial services minister John Glen
called for an investigation in December last year.
Lloyds Chief Executive António Horta-Osório apologised to
victims and said he was committed to implementing the
recommendations of the report.
($1 = 0.7794 pounds)
(Reporting By Iain Withers and Lawrence White, editing by Huw
Jones and Alexandra Hudson)
