UK’s PRA fines HSBC £57m for “historic depositor protection failings”
The UK’s Prudential Regulation Authority (PRA) has handed a £57.4 million fine to banking heavyweight HSBC for historic consumer deposit protection failures.
HSBC handed £57.4m fine from the PRA
The PRA says the fine – which is the second-largest fine issued by the regulator to date – was handed to the bank’s European holding company (HBEU) and its UK subsidiary (HBUK) “for historic depositor protection failings arising from the Firms’ failures over many years to properly implement the requirements set out in the Depositor Protection Rules”.
The Depositor Protection Rules are set out by the Bank of England (BoE) and specify that deposit-taking institutions should deliver information that enables the Financial Services Compensation Scheme (FSCS) to reimburse depositors in the event of a firm going bust.
The PRA claims HSBC failed to supply this information or identity deposits that were eligible for FSCS protection correctly, and did not install an overseer of the relevant governance procedures. It adds the “failings occurred for HBEU between 2015 and 2022, and for HBUK between 2018 and 2021”.
‘Materially undermined’
As part of its investigation, the regulator says it uncovered that 99% of the beneficiary deposits received by the bank were erroneously marked as ineligible for FSCS protection, and that it could not produce evidence that it satisfied certain requirements of the Depositor Protection Rules.
It adds that “HBEU also failed to be duly open and cooperative with the PRA in not alerting the PRA over an approximately 15-month period about problems identified in the incorrect marking of accounts as ‘eligible’ for FSCS protection”.
“HBEU’s depositor protection failings were so significant the PRA determined that it had materially undermined the firm’s readiness for resolution,” the regulator states.
The fine was ultimately reduced from its original £96.5 million total following the firm’s “cooperation throughout the investigation, including the early admission of certain rule breaches”.
“The serious failings in this case go to the heart of the PRA’s safety and soundness objective,” comments Sam Woods, deputy governor for prudential regulation and CEO of the PRA. “It is vital that all banks comply fully with our requirements around preparedness for resolution.”
Speaking to FinTech Futures, HSBC says it is “pleased to have resolved this historic matter” and that its “co-operation with the investigation, as well as our efforts to fully resolve these issues” had been recognised.
The BoE and the PRA have also published revised policies that aim to speed up investigations by establishing “a new path for early cooperation and greater incentives for early admissions”.
The BoE says it plans to consult further on amendments to its enforcement policies this year, leveraging new powers granted to it by the Financial Services and Markets Act 2023.
