HSBC has been fined £57m by the Bank of England’s financial stability arm for failing to protect customer deposits in the event of a banking collapse.
It is the second-highest fine imposed by the Bank’s Prudential Regulation Authority (PRA) and reflects the seriousness of the failings, the watchdog said. The highest fine was £87m, imposed on Credit Suisse last July.
HSBC failed for many years to properly implement the requirements set out in the depositor protection rules, the PRA said. The failings occurred between 2015 and 2022. The fine was imposed on two UK subsidiaries of HSBC Holdings, which are deemed to have the “capacity to cause significant disruption to the UK financial system if they were to fail”.
The bank failed to accurately identify deposits that were eligible for Financial Services Compensation Scheme (FSCS) protection, which insures deposits if a bank collapses.
HSBC lacked “adequate systems and controls, and governance” necessary to enable FSCS to make prompt payments to depositors in the case of a banking collapse, the PRA said. It added that the failings had “materially undermined the firm’s readiness for resolution”.
The PRA said the bank failed to alert the regulator about problems identified in the incorrect marking of accounts as eligible for FSCS protection over 15 months.
HSBC also breached other rules that state that lenders must prepare for resolution with a minimum disruption of critical services in the event of a banking collapse.
Sam Woods, the PRA chief executive and deputy governor for prudential regulation at the Bank of England, 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.
“HSBC Bank plc 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.”
The bank cooperated with the regulator throughout the investigation and agreed to resolve the matter, which meant the fine was reduced; otherwise it would have been £96.5m.
The PRA said HSBC failed to assign a senior manager to the resolution processes required in the event of a banking failure. HSBC Bank plc, the non-ringfenced part, also incorrectly marked 99% of its eligible deposits as “ineligible” for FSCS protection.
HSBC said it was “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 cooperation with the investigation, as well as our efforts to fully resolve these issues. We continue to remain focused on serving our customers.”
