HSBC has been fined £57.4 million by the Prudential Regulatory Authority (PRA) for failing to accurately log accounts that were eligible for compensation under the Financial Services Compensation Scheme (FSCS).
This oversight, which occurred between 2015 and 2022, resulted in up to 99% of accounts that could have received up to £85,000 in compensation in the event of the bank’s failure being incorrectly categorized as ineligible for FSCS protection. The PRA stated that HSBC provided incorrect evidence indicating its systems met the necessary requirements for deposit protection.
The severity of the depositor protection failures was deemed significant enough by the PRA to have “materially undermined” HSBC’s readiness for a potential restructuring. This fine marks the second highest ever imposed by the regulator. However, due to the bank’s cooperation during the investigation and its acknowledgment of the rule violations, HSBC received a 15% reduction in the penalty, along with an additional 30% reduction for reaching an agreement to resolve the issues.
PRA chief executive Sam Woods emphasized that the serious deficiencies highlighted in this case are central to the PRA’s objective of ensuring safety and soundness within the banking sector. He stressed the importance of full compliance from all banks regarding preparedness for resolution, noting that HSBC had significantly fallen short of its obligations and failed to disclose its shortcomings in a timely manner.