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."
More top news
Thousands of women's rights campaigners have held a rally outside Downing Street.
Hundreds of people are visiting St Joseph's Church in Limerick to pay tribute at the church wake for Dolores O'Riordan.
Ukip leader Henry Bolton faces a vote of no confidence but tells ITV News' Robert Peston the party could crumble if he is forced to quit.