TLDR:
- HSBC has been fined £57.4m by the Bank of England for “serious failings” in protecting customer deposits.
- The bank failed to accurately identify deposits eligible for Britain’s Financial Services Compensation Scheme.
- HSBC Bank mistakenly marked 99% of its eligible beneficiary deposits as “ineligible” for FSCS protection, and provided incorrect evidence of compliance with deposit protection rules.
HSBC has been fined £57.4m ($81m) by the Bank of England for “serious failings” over its measures to protect customer deposits. The fine is the second highest to date imposed by the regulator. The bank failed to accurately identify deposits eligible for Britain’s Financial Services Compensation Scheme (FSCS), which protects customer deposits up to the value of £85,000. The regulator, the Bank’s Prudential Regulation Authority (PRA), said that HSBC’s subsidiaries incorrectly classified 99% of its eligible beneficiary deposits as “ineligible” for FSCS protection. The PRA added that the bank failed to be open and cooperative about the issues identified. HSBC said it was pleased to have resolved the matter and would stay focused on serving its customers.
The PRA stated that the failings were so significant that they had materially undermined the firm’s readiness for any restructuring that may have been needed. PRA CEO Sam Woods emphasized the importance of banks complying with requirements around preparedness for resolution, stating that HSBC had fallen short of its obligations and had failed to disclose its failings to the PRA in a timely manner. However, the PRA did not consider these breaches to be deliberate or reckless, and the bank’s cooperation throughout the investigation resulted in a reduction to the penalty. Without these reductions, HSBC would have faced a fine of £96.5m.
HSBC is not the first bank to be fined for failing to protect customer deposits. In 2023, Credit Suisse was fined £87m by the PRA, the highest fine to date. This latest fine for HSBC highlights the importance of banks having accurate systems and controls in place to ensure the correct recording of financial information for depositor protection purposes. The failure to do so can leave customers vulnerable in the event of a bank collapse. The PRA’s enforcement action serves as a reminder to all banks of the seriousness with which regulatory bodies view such compliance failings.
Overall, the PRA’s fine serves as a warning to banks to take seriously their obligations to protect customer deposits and to promptly disclose any compliance failings to regulatory authorities. Banks must ensure that their systems and controls are robust and accurate in order to maintain the trust and confidence of their customers and to meet regulatory requirements. HSBC’s cooperation with the investigation was deemed positive, but the regulator’s action makes it clear that banks cannot afford to be lax in their approach to regulatory compliance.
