HSBC slapped with £57.4m fine for FSCS deposit protection failings

HSBC has been fined £57.4million by the Bank of England’s Prudential Regulation Authority for ‘serious failings’ over customer deposit protection.

The fine is the second highest penalty ever imposed by the financial watchdog.

The Prudential Regulation Authority (PRA) said HSBC failed ‘over many years’ to adequately put in place the requirements to protect saver deposits.

Under the Financial Services Compensation Scheme, customer deposits are protected up to the value of £85,000.

The regulator said that among its failings, HSBC incorrectly marked 99 per cent of eligible beneficiary deposits as being ‘ineligible’ for protection under the Financial Services Compensation Scheme (FSCS).

HSBC’s fine was reduced from £96.5million 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 occurred between 2015 and 2022, while HSBC UK Bank’s issues took place 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, the PRA said.

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.’

A spokesperson for HSBC, said: ‘HSBC is pleased to have resolved this historic matter, which relates to the Bank’s compliance with certain parts of the PRA’s Depositor Protection Rules. 

‘The PRA’s final notice recognises the Bank’s co-operation with the investigation, as well as our efforts to fully resolve these issues. We continue to remain focused on serving our customers.’

HSBC shares slipped 0.2p to 616.80p on Tuesday morning, having risen around 2.4 per cent in the last year.