HSBC fined £57m over deposit protection

HSBC has been fined £57.4m for failing to protect customer deposits.

The Bank of England’s Prudential Regulation Authority (PRA) ruled that between 2015 and 2022 the bank had failed to accurately identify deposits that were eligible for protection under the Financial Services Compensation Scheme (FSCS).

Under this scheme, customer deposits of up to £85,000 are safe in the event of a bank’s collapse.

The fine is the second highest ever applied by the regulator, which it said reflected the seriousness of the failings.

Banks operating in the UK are required to have systems and controls in place to ensure the integrity of information that would be used by the FSCS to make payments to customers in the event that the institution failed. However, HSBC incorrectly marked 99% of eligible deposits as ‘ineligible’ for FSCS protection. It also provided incorrect evidence to the PRA that its systems satisfied certain requirements of the deposit protection rules, the regulator said.

The bank’s cooperation throughout the investigation, including the early admission of certain rule breaches, resulted in a 15% reduction to the penalty. An agreement to resolve the issue qualified for a further 30% reduction. Without these reductions, the fine would have been £96.5m — surpassing the record £87m imposed on Credit Suisse in July 2023.

“It is vital that all banks comply fully with our requirements around preparedness for resolution,” said PRA chief executive Sam Woods, adding that the bank had fallen “far short of its obligations in this area, and failed to disclose its failings to us in a timely manner”.

However, the PRA said that the breaches were not “deliberate or reckless”.