The Financial Services Authority said HBOS's corporate division took too many risks from the start of 2006, leaving it vulnerable to the financial downturn.
Tracey McDermott, FSA acting director of enforcement, said:
"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.
"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."
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