A former senior HBOS banker and five other defendants, who had worked for the consultancy, appeared at Southwark Crown Court charged with alleged corruption and fraud connected to a bank branch in Reading, near London, which dealt with struggling companies between 2003 and 2007.

Former HBOS banker Mark Dobson, along with David Mills, his wife Alison Mills, Michael Bancroft, Jonathan Cohen and John Cartwright have all pleaded not guilty to charges including conspiracy to corrupt, fraudulent trading and conspiracy to conceal criminally gained property.

They are among the first people to face trial for contributing to British bank losses that resulted in a taxpayer rescue of banks eight years ago.

HBOS, once Britain's biggest mortgage lender under the Halifax brand, incurred losses of 245 million pounds ($317 million) related to the alleged conspiracy, the court heard on Monday.

HBOS, which traded under the names Halifax and Bank of Scotland, was rescued in a state-engineered takeover in 2008 by rival Lloyds. Lloyds subsequently needed a 20 billion pound bailout of its own.

Prosecutors told the court that bankers at HBOS told struggling business owners to employ a turnaround consultancy as a condition for getting a loan.

This company, Quayside Corporate Services, was owned by defendant David Mills.

Prosecutors alleged that the businesses were obliged to pay the consultancy high fees for services and, in some cases, hand over ownership.

"The motivation was greed," prosecuting barrister Brian O'Neill told the court.

"The police investigation uncovered evidence of huge rewards," said O'Neill.

"This took the form of money transfers, cash, expensive gifts, use of an American Express card for personal spending, unauthorised and inappropriately lavish hospitality, luxurious foreign travel and sexual encounters with high class escorts."

The prosecution alleges that David Mills provided these rewards to another former senior HBOS banker, Lynden Scourfield, who is not on trial. Scourfield was lead director of impaired assets for HBOS in the south of England.

The court heard how Mills and his wife received more than 28 million pounds through their personal accounts or the accounts of various entities they set up, from some of the bank's high risk clients.

The trial is expected to last up to six months, during which the defence will present its case.

($1 = 0.7721 pounds)

(Reporting by Anjuli Davies; Editing by Adrian Croft)

By Anjuli Davies and Andrew MacAskill