The fine is the biggest ever handed out by the Financial Conduct Authority in relation to the payment protection insurance (PPI) scandal, for which banks in Britain have set aside more than 24 billion pounds to compensate customers.

The FCA found serious failings at Clydesdale, owned by National Australia Bank (>> National Australia Bank Ltd.), between May 2011 and July 2013.

It said the bank provided false information to the Financial Ombudsman Service in response to requests for evidence of the records it held on PPI policies sold to customers. The ombudsman steps in when banks and their customers cannot reach agreement.

A team within Clydesdale's PPI complaint handling operation altered records in a small number of cases to make it look as if the bank had no relevant documents and deleted information listing the products sold to some customers, the FCA said.

"The fact that Clydesdale misled the Financial Ombudsman by providing false information about the information it held is particularly serious and this is reflected in the size of the fine," Georgina Philippou, acting director of enforcement and market oversight at the FCA, said.

Clydesdale is the third bank to be fined for failings in its complaint handling procedures. Lloyds (>> Lloyds Banking Group PLC) was fined 4.3 million pounds in February 2013 and the Co-operative Bank was fined 113,000 pounds in January 2013.

"We deeply regret any instance which led to the Financial Ombudsman Service receiving incorrect or incomplete information from us. These practices were not authorised or condoned by the bank," Clydesdale's acting chief executive Debbie Crosbie said.

Clydesdale set aside another 420 million pounds for PPI compensation in October last year, taking the total amount it has set aside to 806 million.

The bank said on Tuesday that the full cost will not be known until a review of past cases has been completed.

The policies were meant to protect borrowers in the event of sickness or unemployment but were often sold to those who would have been ineligible to claim.

NAB said in October it was looking at ways to exit the UK market after several years of poor performance and after being hit with high mis-selling charges.

(Reporting by Matt Scuffham and Steve Slater. Editing by Jane Merriman)

Stocks treated in this article : Lloyds Banking Group PLC, National Australia Bank Ltd.