Bank of Scotland guilty of serious misconduct
The city watchdog, the Financial Services Authority (FSA) has found the Bank of Scotland guilty of serious misconduct in the way it lent money to businesses between 2006 and 2008.
The FSA said the bank pursued "an aggressive growth strategy" that focused on high risk lending.
That policy contributed to the bank having to be bailed out by UK taxpayer, said the FSA.
The bank has escaped paying a substantial fine.
The FSA said imposing a fine would have meant the taxpayer effectively paying twice "for the same actions committed by the firm".
Instead it has decided to issue a public censure "to ensure details of the firm's misconduct can be viewed by all and act as a lesson in risk management failings".
In its investigations, the FSA found that the corporate division's transactions increased in size, complexity and risk over the two year period.
Much of its lending was to property companies and "significant large borrowers".
The watchdog said that although the "strategy was highly vulnerable to a downturn in the economic cycle", the bank continued with it "even as markets began to worsen in 2007".
When things started to go wrong the FSA said the bank was slow to react and did not have adequate systems in place.
Tracey McDermott, FSA acting director of enforcement, said: "Banks and other firms have to manage their business by ensuring that their systems and controls are appropriate for the risks that they are running.
"The conduct of the Bank of Scotland illustrates how a failure to meet regulatory requirements can end not just in massive costs to a firm, but losses to shareholders, taxpayers and the economy."
Lloyds took over the bank at the height of the banking crisis and was forced to write off more than £20bn.