FCA has published the unredacted version of its final notice against the Bank of Scotland plc originally published in March 2012. The notice related to failure to comply with Principle 3, and confirmed FCA’s decision not to impose a financial penalty because of the exceptional financial circumstances of the bank at that time. The failings related to the corporate banking division’s policy of high-risk, sub-investment grade lending, which it pursued despite knowing of weaknesses in the control framework – and continued to pursue in the knowledge of weakening market conditions. At the time, details of what the notice refers to as “the Reading Incident” were redacted, but have now been included. The paragraphs in question detail in particular the actions of a senior staff member who had been sanctioning actions beyond his authority for years, and which indicated failings in the first line of defence (ineffective oversight, controls and culture), the second line of defence (failure to identify the issue) and the third line (failures in audit and risk activities). Press reports indicate the paragraphs were originally omitted because of an ongoing criminal investigation by the police which is now concluded.
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