The Financial Conduct Authority (FCA) has been criticised for allowing Lloyds Banking Group to set up a "flawed" compensation scheme for victims of a massive fraud. The SME Alliance, which represents small firms ruined in the fraud, has filed an official complaint with FCA. It accuses Lloyds of covering up its awareness of criminality and excluding some victims from compensation. Lloyds said it believes its voluntary scheme is fair. The bank also said it is reviewing whether the fraud was properly disclosed with the help of a High Court judge.

The compensation scheme was announced after the January 2017 convictions for fraud, corruption and money laundering of six people including two former bankers of HBOS, a subsidiary of Lloyds. The 245m scandal targeted small business customers, who were typically forced out of their firms and ruined. Lloyds' chief executive Antonio Horta-Osorio said he was "absolutely determined" that victims were compensated "fairly" and "swiftly". The bank set up a review with the agreement of Andrew Bailey, chief executive of the FCA.