Bank of Scotland has been fined £45.5m for failing to alert authorities to possible incidents of fraud.
The fine relates to suspicious conduct by the Impaired Assets team in 2007 and in particular the activities of its director, Lynden Scourfield.
The Financial Conduct Authority (FCA) said the bank knew he had been sanctioning lending beyond his authority, but failed to act properly.
In February 2017, Scourfield was sentenced to 11 years in jail.
Five other individuals were also jailed for their part in the fraud.
Bank of Scotland was then part of Halifax Bank of Scotland (HBOS), which became part of the Lloyds Banking Group in 2008.
The FCA said that, despite being aware of Scourfield’s activities, full information was not provided to regulators until July 2009.
“There is also no evidence anyone realised, or even thought about, the consequences of not informing the authorities, including how that might delay proper scrutiny of the misconduct and prejudice the interests of justice,” the FCA said in a statement.
“There was insufficient challenge, scrutiny or inquiry across the organisation and from top to bottom,” it said.