Customers of the Bank of Queensland who were caught up in the Storm Financial collapse will share in a $17m compensation package.

Bank of Queensland customers caught up in the Storm Financial scandal will receive a $17 million compensation windfall from the lender.

The bank agreed to the payout as part of a settlement of legal action brought by the corporate watchdog and borrowers who invested in Storm before its collapse in 2009.

BoQ will hand out $17 million to customers who borrowed money and suffered hefty losses on investments made through Storm.

Customers caught up in the scandal are expected to be compensated for about 45 per cent of their total losses.

Acting chief executive Jon Sutton said those eligible for compensation would be contacted and could either accept a settlement or remain on their current repayment plan.

“We are pleased to have reached a resolution to this long-running issue and will now work towards providing certainty to the customers who were involved,” he said in a statement on Monday.

The settlement is yet to be approved by the Federal Court.

However, while customers will be compensated, the terms of the settlement include an acknowledgment by all parties that the bank denies any wrongdoing.

Townsville-based Storm collapsed with debts of $88 million, with some customers losing their entire life savings and homes.

The Australian Securities and Investments Commission launched legal action against BoQ, Macquarie Bank and the Commonwealth Bank following Storm’s collapse.

ASIC alleged Storm operated an unlawful managed investment scheme, which the banks were involved in.

CommBank in 2012 agreed to pay up to $136 million in compensation, on top of $132 million it had already provided Storm investors.

Macquarie last week agreed to a $82.5 million compensation settlement.

ASIC chairman Greg Medcraft said BoQ’s agreement to compensate customers brought to an end the watchdog’s existing legal action against the banks to seek compensation for Storm investors.

“The settlement provides a certain compensation outcome which ASIC considered preferable to awaiting judgment in its proceedings and possible appeals,” he said.

ASIC is continuing with civil proceedings against Storm’s founders for alleged breaches of their directors’ duties.