The Prudential Regulatory Authority (PRA) has imposed a substantial fine of £57.4 million on the banking giant HSBC for its failure to correctly log accounts eligible for compensation under the Financial Services Compensation Scheme (FSCS). This error, which persisted from 2015 to 2022, resulted in up to 99% of accounts that should have been eligible for up to £85,000 in compensation – in the event of the bank’s failure – being mistakenly marked as ineligible for FSCS protection.
The HSBC misclassification raised serious concerns about the bank’s adherence to depositor protection rules. The PRA’s investigation revealed that HSBC had provided incorrect information regarding its compliance with certain requirements of the deposit protection rules. The magnitude of these depositor protection failings was so severe that the PRA stated it had “materially undermined” HSBC‘s preparedness for a potential restructuring.
This fine ranks as the second highest ever issued by the PRA. However, HSBC‘s cooperative stance during the investigation and acknowledgment of its regulatory breaches led to a 15% reduction in the penalty. Additionally, the bank’s commitment to resolving the issue earned it a further 30% reduction in the fine.
PRA Chief Executive Sam Woods emphasized the gravity of these failings, stating, “The serious failings in this case go to the heart of the PRA’s safety and soundness objective.” He highlighted the necessity for all banks to comply fully with requirements regarding preparedness for resolution. Woods also noted that HSBC had significantly fallen short of its obligations in this area and had delayed in disclosing its failings to the regulatory authority in a timely manner.
