HSBC fined $73 million by Bank of England for ‘serious failings’ in UK deposit protection

HSBC has faced a fine of 57.4 million pounds ($73 million) for “serious failings” in protecting some depositors over several years, under the British rules designed to protect customers if banks fail.

According to the Bank of England’s Prudential Regulation Authority (PRA), HSBC failed to accurately identify deposits eligible for Britain’s Financial Services Compensation Scheme (FSCS) - which protects customer cash up to 85,000 pounds.

“The serious failings in this case go to the heart of the PRA’s safety and soundness objective,” said Sam Woods, Deputy Governor of the Bank of England and CEO of the PRA. “It is vital that all banks comply fully with our requirements around preparedness for resolution.”

The deposit protection rules of Britain require lenders to ensure critical information is held in order for the FSCS to compensate customers if a firm fails.

The failings at one unit of HSBC - which was found to have incorrectly marked 99% of eligible beneficiary deposits as ineligible - were such that the BoE judged it would have “materially undermined” any efforts by regulators to wind it up.

HSBC said it was pleased to have resolved the matter.

“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,” an HSBC spokesperson said.

The PRA mentioned that the failings took place at HSBC Bank between 2015 and 2022 and at HSBC UK Bank between 2018 and 2021.

As the bank has cooperated in the investigation that is why the PRA has reduced HSBC’s fine to 57 million pounds from 96.5 million pounds, said the regulator.