The charitable arm of Lloyds Banking Group of Scotland has launched legal action against the bank in a bid to reclaim a sum of £3.5m that it says should have passed on to good causes.
According to reports, Lloyds TSB Foundation for Scotland has served a summons to the bank, which was bailed-out by the taxpayer in 2008, after claiming the firm has breached a historic agreement between the two organisations, which sees millions donated to charities across Scotland.
The firm is understood to have received £38,920 from Lloyds Banking Group this year, despite the foundation’s chief executive Mary Craig claiming the number should be closer to £3.5m under the terms of the covenant.
The covenant, which is sealed by an act of parliament, has ensured the foundation – and sister organisations in England, Wales, Northern Ireland and the Channel Islands – receive 1 per cent of the banks pre-tax profits. This is based on the average pre-tax profits for the past three years.
The foundation argues it should have been in line to receive 19.46 per cent of the original 1 per cent. Craig says the bank has made its calculations based on losses last year of £6.2bn rather than pre-tax profits.
She says: “We cannot afford to allow the discussion about our funding to drag on any longer, as there are also implications for our future monies if the group continues to misinterpret the covenant calculation. Court action is the only way to resolve this situation once and for all.
“In previous years, the amounts reached using the formula in the covenant have been agreed between us with little difficulty.
A spokesman for Lloyds Banking Group says: “We disagree with the foundation’s interpretation. However, it would be inappropriate to comment further on the litigation.”