HSBC fined £57.4m by Bank of England over historic depositor protection failings
HSBC was hit with a £57.4m fine by the Bank of England’s Prudential Regulation Authority (PRA) on Tuesday for “serious failings” in protecting customers’ deposits.
The fine represents the second highest penalty ever imposed by the financial watchdog, which said HSBC failed “over many years” to properly put in place the requirements to safeguard some deposits between 2015 and 2022.
In a statement this morning, the PRA said that among its failings, the Asia-focused lender incorrectly marked 99 per cent of its eligible beneficiary deposits as “ineligible” for protection under the Financial Services Compensation Scheme (FSCS).
The scheme protects up to £85,000 per eligible depositor if their bank fails. Under the FSCS, lenders must have systems to help regulators identify deposits that would be eligible for protection.
Sam Woods, chief executive of the PRA, said the bank’s failings went “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. “HBEU fell far short of its obligations in this area, and failed to disclose its failings to us in a timely manner. These failures led to today’s action, including the significant fine.”
Among the charge sheet laid out by the PRA today were a failure to assign clear ownership for the processes required under the depositor protection rules, and the failure to ensure that a senior manager was allocated responsibility for these processes.
The fine, initially £96.5m, was slashed by 15 per cent due to HSBC’s cooperation and a further 30 per cent after it agreed to resolve the issue. HSBC reported a net income of £76.2bn across the seven-year period.
The PRA said it did not consider that the breaches “deliberate or reckless”.
HSBC said in a statement that it was “pleased to have resolved this historic matter” and continues “to remain focused on serving our customers”.
Only Credit Suisse has faced a bigger penalty from the watchdog when it was hit with a £87m charge over risk and governance failings last year.
The Financial Conduct Authority previously fined HSBC £63.9m in December 2021 for “serious weaknesses” in its anti-money laundering processes between 2010 and 2018.
This morning’s fine came as the Bank of England and PRA published a policy statement setting out a revised approach to enforcement for both PRA firms and financial market infrastructure firms.
In a statement, the PRA said the revised policies set out “a new path for early cooperation and greater incentives for early admissions with the aim of speeding up investigations in appropriate cases.”