HSBC has been fined £57.4 million (S$97.6 million) for “serious failings” in protecting some depositors over several years, in the first penalty of its kind under British rules designed to protect customers if banks fail.

The Bank of England’s Prudential Regulation Authority (PRA) said on Tuesday (Jan 30) that HSBC failed to accurately identify deposits eligible for Britain’s Financial Services Compensation Scheme (FSCS) – which protects customer cash up to £85,000.

This is the second largest fine ever imposed by the PRA, topped only by an £87 million penalty on Credit Suisse in July 2023.

“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.”

UBS’s takeover of its Swiss rival Credit Suisse in March has raised concerns about whether the too-big-to-fail regulatory framework that emerged from the financial crisis in 2008 is fit for purpose.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Globally systemically important banks – such as HSBC and UBS – are required to plan for resolution, which should allow regulators to unwind them without triggering broader systemic consequences.

Britain’s deposit protection rules 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 per cent 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 co-operation 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 failings occurred at HSBC Bank between 2015 and 2022, and at HSBC UK Bank between 2018 and 2021, the PRA said.

The PRA reduced HSBC’s fine to £57 million from £96.5 million in return for the bank’s co-operation with the investigation, the regulator added. REUTERS