BANKERS at Lloyds Group have been accused of “determined vandalism” and  “disowning their heritage” after it confirmed it was severing ties with the charity foundation it created 25 years ago.

The group has told Lloyds TSB Foundation for Scotland that it is to end its joint covenant within nine years, effectively ending all ties with the fund.

The decision follows a dispute between the two organisations after Lloyds said that it wanted to end a legal agreement whereby the bank pays a percentage of its profits each year to the charitable foundation.

The covenant, sealed by an act of parliament, ensured the foundation received a one per cent share of the group’s pre-tax profits.

But last year, Lloyds issued a warning that it was not expected to make any profits. Instead it offered a funding package over the next four years, provided the foundation agreed to new terms which would not guarantee as much long-term income.

Mary Craig, chief executive of the foundation, said: “We are extremely sad to announce that, in what can only be described as an act of determined vandalism, Lloyds Banking Group has served notice to the foundation that will break its covenant with us, which was set up over 25 years ago.

“In breaking the covenant now, Lloyds Banking Group has disowned its heritage and is choosing to ignore the role Scottish communities and their savings played in it being where it is today.”

Craig said the banking group, which has given the foundation £85m since 1995, had proposed to reduce the amount of pre-tax profit it gives to the foundation from one per cent  to 0.5 per cent – an offer that was rejected twice.

She added that it was also trying to “undermine the independence of the foundation” by refusing to approve a unanimous vote by trustees to reappoint chairman Christine Lenihan without any explanation.

Lucy McTernan, deputy chief executive of the Scottish Council for Voluntary Organisations agreed that the  move attempted to undermine the organisation.

She said: “The termination of the covenant is terrible news, not only for the foundation but for the charities and voluntary organisations that rely on it. It means a loss of vital funding just when it’s needed the most.

“The bank’s refusal to re-appoint the chair of the foundation amounts to demonstrable meddling in their independent governance.  It’s a shame that a bank now largely owned by the tax payer is taking such a draconian approach.”

Shane O’Riordain, communications director for Lloyds Banking Group, said it had “worked very hard” to try to reach an agreement with the foundation.

“We are fully committed to supporting communities throughout Scotland and our door remains open to the Scottish foundation.”

Lloyds Banking Group plans to set up a Bank of Scotland foundation, which will become
its sole community investment vehicle in Scotland.

Craig, however, vowed that the charity would find a way to continue funding communities in Scotland.  

“Although concerned at the current situation we now find ourselves in, we have already started to look to the future as you might expect.

“In effect, we now have nine years remaining with the group under our existing covenant, rather than the new agreement they were proposing, which would have seen our income halved and our independence lost.

“Trustees have been taking steps since last November to mitigate against this day coming.”