Bank of Scotland (BoS) has been fined £45.5m by the City regulator for failures to disclose suspicions of fraud at its scandal-hit Reading branch.
The Financial Conduct Authority (FCA) said the bank first identified suspicious conduct in the Impaired Asset Team (IAT), based in the Berkshire town, in early 2007.
It said that it was not until July 2009 that regulators were provided with full disclosure.
Six people were jailed in 2017 in connection with the fraud, including two former HBOS managers.
The £245m scam saw bank manager Lynden Scourfield approve inappropriate loans for struggling businesses at the behest of financial consultant David Mills in exchange for designer watches, exotic holidays and sex parties.
Lloyds, which bought the Bank of Scotland arm in 2009, pledged compensation to victims but has since been involved in a high profile row with TV host Noel Edmonds who argues his business folded as a result of the scandal.
The FCA said BoS qualified for a 30% discount to its penalty – which would have hit £65m – because it agreed to settle its case.
It added that in addition to the fine, it had banned four individuals from working in financial services due to their roles.
They were identified as Lynden Scourfield, Mark Dobson, Alison Mills and David Mills.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Bank of Scotland failed to alert the regulator and the police about suspicions of fraud at its Reading branch when those suspicions first became apparent.
“BOS’s failures caused delays to the investigations by both the FCA and Thames Valley Police.”