June 21, 2018 / 10:55 PM / in 9 months

British lawmakers call for probe of Lloyds, KPMG over HBOS fraud

June 21 (Reuters) - A group of British lawmakers on Thursday called for an investigation by law enforcement and regulatory agencies into the handling by Lloyds Banking Group of a fraud at its HBOS Reading unit more than a decade ago and into the role of auditor KPMG.

The call by the All Party Parliamentary Group (APPG) on Fair Business Banking comes after the publication online on Tuesday of an internal 2013 report alleging serious misconduct by the lender over the handling and disclosure of the fraud.

The lawmakers said allegations that HBOS had concealed the fraud, one of Britain’s worst-ever banking scandals that saw six people jailed for a total of 47 years last year, should be subject to “full, forensic and expeditious investigations by regulators”.

A Lloyds spokeswoman reiterated the bank’s statement on Tuesday that the internal 2013 report had been provided to Britain’s Financial Conduct Authority (FCA) and to the police in 2014.

KPMG did not immediately respond to requests for comment outside regular UK business hours.

The internal report published on Tuesday by Scottish businessman Neil Mitchell, a frequent critic of Britain’s big banks, alleged that HBOS executives knew of the fraud as early as 2004 and failed to properly disclose it, with far-reaching implications given Lloyds’ takeover of HBOS in 2009.

In its statement on Tuesday, Lloyds did not address the substance of the report’s allegations that it misled investors over its financial health by not disclosing the fraud earlier.

Britain’s financial watchdog is conducting a probe into HBOS and what its executives knew of the fraud, while a retired judge is probing whether Lloyds then properly investigated the incident after it brought HBOS in 2009. (Reporting by Emma Rumney in London Additional reporting by Ismail Shakil in Bengaluru Editing by Nick Tattersall and Toni Reinhold)

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