UK’s Financial Conduct Authority (FCA) has fined National Australia Bank’s Clydesdale Bank £20.7m for inadequate handling of payment protection insurance (PPI)-complaint processes, which is the largest ever penalty.

According to the authority, the bank adopted inappropriate policies in mid-2011 which meant that its PPI-complaint handlers were not considering all relevant documents when deciding on the way to deal with complaints.

Also, Clydesdale provided false information to the Financial Ombudsman Service between May 2012 and June 2013, following various requests for evidence of the records it held on the policies that were sold to individual customers.

Clydesdale’s PPI-complaint handling operation team made modifications to certain system printouts, making it look as if the bank held no relevant documents.

All PPI information was also deleted from a separate printout, listing the products that were sold to the customer.

FCA said that either the bank’s PPI leadership team or more senior management were not aware of these practices.

FCA acting director of enforcement and market oversight Georgina Philippou said: "Clydesdale’s failings were unacceptable and fell well below the standard the FCA expects.

"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."

Out of the 126,600 PPI complaints decided between May 2011 and July 2013, up to 42,200 may have been rejected unfairly due to Clydesdale’s misconduct.

Up to 50,900 upheld complaints also resulted in inadequate redressal for customers. Complaint handlers could not identify cases where the PPI policy sold was unsuitable for the customer as found by the British financial regulator.

Clydesdale Bank operates the Clydesdale Bank as well as Yorkshire Bank brands.