The Bank of Scotland was guilty of "very serious misconduct" which contributed to the taxpayer bailout of its parent company HBOS, the City watchdog has found.
The FSA criticised the "aggressive deal structures" increasingly pursued by the bank and said it failed to reduce its risky behaviour despite expectations of a downturn in the markets.
Although this behaviour contributed to the taxpayer bailout of HBOS - and the eventual bailout of Lloyds, which bought HBOS - there will be no punishment as the FSA seeks to protect taxpayers' money.
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The company said its role was not to decide what was or was not compliant with local building regulations.