Lloyds Bank overstated interest-bearing deposits to BoE by £44bn

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Lloyds Banking Group wrongly classified £44.1bn of customer deposits in figures submitted to the Bank of England, an error that fed through to official data used to scrutinise whether banks were short-changing consumers on interest payments.

The group said the deposits were earning interest when they were not, leading to inaccuracies in the BoE’s sector-wide data used by the Financial Conduct Authority in its review of the cash savings market.

The BoE said that as of October last year, £232bn was held in individuals’ accounts earning no interest, compared with £1.5tn in accounts that did attract interest payments. 

Lloyds’ error was rectified late last year, leading the amount of deposits in non-interest bearing accounts to jump to £282bn when the BoE published its figures for November.

The data is collated monthly based on submissions from individual banks, with the BoE producing a national total showing in which type of account money is held across the UK.

Lloyds said an internal review last year had turned up several current account products that it had incorrectly classified when it submitted its statistics. The bank said it had informed the BoE and updated its latest submission to correct the error.

“There is no impact to customers, no impact to capital, and no impact on external financial reporting”, Lloyds said.

The BoE declined to comment.

The mistake by Lloyds risks invalidating the historic accuracy of the data used by the FCA in its review of the cash savings market.

Banks have faced intense scrutiny over how quickly they have passed on interest rate increases and cuts to savers and borrowers since a cycle of rapid rate changes kicked off in early 2022. Lenders recorded a period of bumper profits as they increased the rates they charged on loans more quickly than they passed on the benefit of higher rates to savers, boosting margins.

Harriett Baldwin, then-chair of the Treasury select committee, accused the banks at the time of “[taking] advantage of their most loyal savings customers to boost profit margins”.

The windfall to lenders prompted a threat from former chancellor Jeremy Hunt to take regulatory action against lenders that failed to boost rates on savings, and culminated in the FCA’s July 2023 review.

In September 2024, the FCA again used the BoE figures when it provided an update to the review, noting it had worked with nine banks and building societies — including Lloyds — to ensure they provided fair value to customers.

A person familiar with the matter said Lloyds’ reporting error meant figures on average easy access rates cited by the FCA in its report would have been lower than they should have been.

However, the person said the error was unlikely to have materially affected the watchdog’s review of the cash savings market, its conclusions or policy actions.

The FCA declined to comment.

While Lloyds’ reporting mistake had no material consequences, such clerical errors can be costly for banks.

Barclays had to pay a $361mn penalty to the US Securities and Exchange Commission and £450mn to investors in 2022 and after it accidentally offered billions of dollars more securities to investors than it was authorised to.

In 2018, Metro Bank’s inaccurate reporting of the risk weighting applied to some of its commercial loans sparked a crisis at the challenger bank and ultimately resulted in £15mn of fines from the FCA and BoE.