HSBC has been fined £57.4 million by the Bank of England’s Prudential Regulation Authority for “serious failings” over customer deposit protection – the second highest penalty ever imposed by the financial watchdog.
The Prudential Regulation Authority (PRA) said HSBC failed “over many years” to properly put in place the requirements to protect saver deposits dating back to 2015.
The regulator said that among its failings, HSBC incorrectly marked 99% of eligible beneficiary deposits as being “ineligible” for protection under the Financial Services Compensation Scheme (FSCS).
HSBC’s fine was reduced from an initial £96.5 million for co-operation with the investigation, early admission of rule breaches and agreeing to resolve the matter, according to the PRA.
Sam Woods, the Bank’s deputy governor for prudential regulation and chief executive of the PRA, said: “The serious failings in this case go to the heart of the PRA’s safety and soundness objective.
“It is vital that all banks comply fully with our requirements around preparedness for resolution.”
He added the bank “fell far short of its obligations in this area, and failed to disclose its failings to us in a timely manner”.
Under the depositor protection rules, banks and building societies are required to put in place proper systems and controls to ensure vital information is logged correctly, which the FSCS relies on to make payments to savers in the event of a firm going bust.
The PRA said HSBC Bank’s depositor protection failings were “so significant, the PRA determined that it had materially undermined the firm’s readiness for resolution”.
The watchdog added that HSBC Bank also failed to be “duly open and cooperative” by not alerting it over a period of around 15 months after identifying problems in incorrectly marking of accounts as being eligible for FSCS protection.
HSBC Bank’s failures date back to between 2015 and 2022 and for HSBC UK Bank to between 2018 and 2021.
The lender’s failures include not assigning clear ownership – or ensuring a senior manager was given responsibility – for the processes required under the deposit protection rules, according to the PRA.
The watchdog added that HSBC incorrectly said that its systems met a number of requirements under the deposit protection rules, while the bank also did not give final annual accounts signed off by directors confirming compliance over “multiple years”.
But the PRA said it did not believe that HSBC’s breaches were “deliberate or reckless”.
HSBC said it was “pleased to have resolved this historic matter”.
“The PRA’s final notice recognises the Bank’s co-operation with the investigation, as well as our efforts to fully resolve these issues,” the bank added.