HSBC Hit With $73 Million Fine by UK Watchdog for Deposit Protection Failings
By Trisha Andrada
Jan 30, 2024 07:26 AM EST
Jan 30, 2024 07:26 AM EST
Bank of England officials found "serious failings" in HSBC's safeguards for client funds, leading to a £57.4 million ($72.8 million) penalty. The fine is the second-highest ever levied by the United Kingdom regulatory, reflecting the gravity of the breaches.
According to the Bank's Prudential Regulation Authority (PRA), the financial firm misidentified deposits eligible for Britain's Financial Services Compensation Scheme (FSCS), as reported by BBC.
Customers' funds are insured up to £85,000 ($107,000) under the scheme. To ensure accurate logging of financial information, banks must implement systems and procedures in accordance with depositor protection regulations. In the event of a bank failure, the FSCS will require this data to pay out clients.
The problems, according to PRA, happened between 2015 and 2022.
HSBC Bank, a subsidiary of HSBC, mistakenly listed 99% of beneficiary deposits that really qualified for FSCS protection as " ineligible. "
HSBC Bank was also criticized by the PRA for presenting false evidence about the compliance of its systems with certain deposit protection regulations. The PRA found that the shortcomings were so serious that they significantly diminished the company's preparedness for a possible reorganization.
The bank was also found to have neglected its responsibility to inform the PRA of the detected issues for a period of nearly 15 months.
Sam Woods, PRA chief executive, said in a press release: "The serious failings in this case go to the heart of the PRA's safety and soundness objective. It is vital that all banks comply fully with our requirements around preparedness for resolution." He went on to say that the bank needed to pay more attention to its responsibilities and inform the agency about the issues quickly enough.
Nonetheless, the PRA said that it did not see the bank's breaches as "deliberate or reckless."
The regulator claimed that the penalty was reduced since the bank cooperated during the inquiry and admitted early on that it had breached regulations.
HSBC assured its consumers that it would keep its attention from their needs. "The PRA's final notice recognises the Bank's co-operation with the investigation, as well as our efforts to fully resolve these issues."
This is not the first time HSBC has encountered trouble with regulations because of flaws in its banking operations.
For serious breaches of its anti-money laundering policies, the UK's banking authority penalized the lending behemoth with a £63.9 million ($81 million) punishment in 2021.
Moreover, there have been many warnings about HSBC's inadequate protection against financial crime, according to the Financial Conduct Authority (FCA).
Meanwhile, the United States Department of Justice investigated HSBC in 2012 and found that the bank had failed to prevent the money laundering of Mexican drug cartels, leading to a $1.9 billion settlement. The US government has promised to keep an eye on the bank for the next five years.
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