HSBC Hit with £57.4 Million Fine Over Customer Deposit Protection Failures

The Bank of England has imposed a £57.4m penalty on HSBC for significant shortcomings in the bank's process to safeguard customer deposits.

HSBC inadequately determined which deposits qualified for the Financial Services Compensation Scheme (FSCS), which protects individual deposits up to £85,000. HSBC has acknowledged resolving the issue.

This is the regulator's second-largest fine, indicating the severity of the breach, which occurred from 2015 to 2022. Proper protocols require banks to ensure accurate financial record-keeping for potential FSCS payouts in case of bank failures.

HSBC Bank, an arm of HSBC, misclassified 99% of its protected deposits as unprotected. It also misrepresented its compliance with safeguarding rules.

The Prudential Regulation Authority (PRA) noted these errors hindered HSBC’s readiness for potential restructuring and criticized the bank's lack of prompt disclosure about the identified issues.

PRA CEO Sam Woods emphasized that adherence to preparedness and resolution guidelines is critical for the banking system's stability. HSBC significantly breached these requirements without timely reporting.

Although the PRA did not find HSBC's actions intentional or reckless, the bank's cooperation during the investigation led to a reduced fine; otherwise, it would have faced a £96.5m fine.

HSBC has vowed to stay dedicated to customer service and recognizes the PRA's acknowledgment of its cooperative stance and remedial efforts.

Previously, in 2021, the UK’s Financial Conduct Authority fined HSBC £63.9m for lapses in anti-money laundering controls. Moreover, in 2012, HSBC paid $1.9bn following a money laundering investigation by US authorities, leading to oversight by US regulators for five years.

The most substantial PRA fine to date was £87m, levied on Credit Suisse in July 2023.