THE Bank of Scotland (BoS) has been fined £750,000 by the City's watchdog for putting 30,000 Pep and Isa customers "at risk of losing money".

The Financial Services Authority (FSA) said it had fined BoS - part of HBOS - for the failure of its Isa and Pep department to administer customers' funds appropriately.

In a statement, the FSA said the problem had also exposed BoS to increased risks of fraud.

The statement said: "From November 1999 until August 2001, problems with BoS systems used to administer Peps and Isas meant that the bank could not be sure how much money it was holding on behalf of individual customers."

BoS said it had addressed the weaknesses and was paying compensation where due.

Andrew Procter, director for enforcement at the FSA, said: "The combination of inadequate controls and the lack of staff training were a systemic weakness in Bank of Scotland's Pep and Isa department."

A spokeswoman for the FSA said: "People were not credited with interest payments on time, meaning they could not use the money to invest."

She added that the fine was imposed because of the potential for customers to lose money.

BoS will have to pay £10,350 compensation shared between 5,549 customers, which the FSA said was very small because of the general fall in the value of shares.

BoS admitted it took too long to solve the problems and apologised, saying it had learnt a hard lesson.

In a statement, it said: "Bank of Scotland's customers had every right to expect that the administration of their Pep/Isa accounts would be done properly. That did not always happen and we have apologised to those customers whose accounts were not in order."

The fine is the latest in a number of penalties the FSA has enforced, including fining the Royal Bank of Scotland £750,000 last year for failing to adequately carry out basic customer checks necessary to stop money-laundering.