A complaint against City firm Herbert Smith Freehills over its role in the HBOS fraud scandal has been filed by a group of MPs. 

The all-party group on banking – a cross party parliamentary organisation that deals with business banking issues faced by constituents – has criticised the advice Herbert Smith Freehills gave to Lloyds Bank during its customer review to compensate victims of the £245m scam in which small businesses were pushed under or damaged by being referred to a turnaround consultancy and loaded with unmanageable debts and fees.

The compensation scheme is due to be reopened after Sir Ross Cranston, a retired High Court judge, found that Lloyds' original compensation scheme - known as the Griggs review - was ‘neither fair nor reasonable’.

Herbert Smith Freehills is also accused of trying to discredit whistleblower Sally Masterton, who formerly worked for HBOS and Lloyds. The all-party parliamentary group claim there has been a lack of transparency for 10 years as a result of Masterton’s treatment.

In February, the group's co-chair, Kevin Hollinrake MP, told the House of Commons: 'The legal advisers Herbert Smith Freehills are clear that they misled the Financial Conduct Authority about Sally Masterton, the whistleblower.'

He added that the firm had advised Lloyds on the establishment of the Griggs review, on its operation and on some legal points ‘incorrectly’ and should be investigated by the SRA.

An SRA spokesperson said: ‘We continue to investigate before deciding on any next steps.’

Herbert Smith Freehills has been approached for comment.