Victims of HBOS fraud offered 3 million pounds in compensation

By Iain Withers and Lawrence White

LONDON (Reuters) -Victims of one of Britain's biggest banking frauds will be offered 3 million pound ($3.66 million) compensation packages, a source familiar with the matter told Reuters on Monday.

Halifax Bank of Scotland (HBOS) - which was later bought by Lloyds Banking Group - was involved in a major fraud in the early 2000s at its branch in Reading, west of London, in which the conspirators enriched themselves at the expense of struggling business clients.

Discovery of the scam led to six people, including two former HBOS bankers, being jailed in 2017 for a combined 47 years.

Around 200 people who ran companies hit by the fraud will be made the payment offer by a panel chaired by former High Court judge David Foskett, the source said, if they are assessed to have made financial losses as a result of the fraud.

Eligible business owners will be given the option of accepting the packages instead of taking part in a re-review of their cases, which could extend the wait for compensation yet further.

If all the people were found to be eligible and the offers accepted it could lead to a compensation bill for Lloyds of around 600 million pounds.

Lloyds set aside 790 million pounds last year for costs relating to HBOS Reading, including an estimate for potential future payments from the Foskett Panel.

"We remain extremely sorry to all the customers who were impacted by the crimes committed at HBOS Reading," a Lloyds spokesperson said, adding the bank had been engaging with the panel and other stakeholders.

The compensation offers were first reported by Sky News.

The potential payouts show how Lloyds is still grappling with misconduct stemming from the buildup to the 2008 financial crisis, years after most of its peers have largely moved on.

The lender originally set up a compensation scheme in 2017, but has faced repeated criticism from lawmakers and victims over the speed of the process and the amounts offered.

"The panel will issue its announcement to customers of the package of measures agreed in the next few days," a spokesperson for the Foskett Panel said.

($1 = 0.8196 pounds)

(Reporting by Iain Withers and Lawrence White; Editing by Susan Fenton)