Lloyds Banking Group has been stopped at the High Court from removing high interest bonds from around 100,000 private investors.
The bank had been attempting to buy back the bonds, which had interest rates of between 6% and 16%, at face value and so save itself a couple of million pounds.
Lloyds claimed it had the right to redeem the bonds early as they had not been counted as part of the Bank of England's stress test.
However, Sir Terence Etherton, head of the Chancery Division of the High Court, said that the bailed-out bank was not entitled to do so as the instruments can be counted into future stress tests.
Lloyds said that it would appeal the decision. A statement read: "The group is disappointed with the decision and has sought permission to appeal to the court of appeal.
"In the event that the group is unsuccessful in the appeal the opportunity to refinance these high coupon securities, with an associated benefit of [approximately] £200m per annum for the next five years, would be foregone."
However, Mark Taber, an activist who led the battle against the bank, said that it "should take the decision on the chin.
"It has put investors through months of uncertainly and now admits to a mistake. A very senior judge has disagreed with their case. They should accept the judgement and move on, or make a better offer for the bonds.
"Lloyds' approach shows a complete lack of integrity."