Halifax was found to be in breach of the Banking Code over changes to its popular Bonus Gold savings account.

The changes involved customers losing their accrued bonus if they moved their money to another bank, effectively a penalty, which is not permitted under the code.

The news will come as a further blow to HBOS group, following a downgrading of its debt by leading credit agency Standard & Poor's.

Disadvantaged savers

"This incident reflected an initial interpretation of the Banking Code that was too legalistic and literal and failed to follow the spirit of the Code.

As a result customers were going to be unfairly disadvantaged," said Seymour Fortescue, Chief Executive of the board.

Halifax made good the losses its customers had suffered within two weeks of the changes, at a cost of half a million pounds.

Mr Fortescue said he welcomed Halifax's quick action to remove the penalty.

And Halifax will be cheered by the Banking Code Standards Board confirmation that other changes to its Bonus Gold account - cuts in rates paid to savers if balances fell below £10,000 - complied with the code because the bank had given savers adequate notice.

More change ahead

The ruling comes ahead of changes to the Banking Code, due in March.

It recommends that banks should notify all savings account customers in writing when interest rates fall by half a percentage point or more.

At present banks and building societies are obliged only to display rate cuts in their branches.