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Bank of England Fined HSBC Bank £57.4 million, Know reason


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The Bank of England has fined HSBC £57.4 million due to serious failings in protecting customer deposits. The bank did not accurately identify deposits eligible for the Financial Services Compensation Scheme (FSCS), a program safeguarding customer deposits up to £85,000.

HSBC Holdings plc, originally The Hongkong and Shanghai Banking Corporation, and known locally as HongkongBank in Hong Kong, Canada and Australia during the early 1980s to late 1990s, is a British universal bank and financial services group headquartered in London, England, with business links to East Asia and a multinational footprint.

Timeline of Failures (2015-2022):

The failings occurred between 2015 and 2022, where HSBC failed to implement proper systems to ensure correct logging of financial information, crucial for FSCS payments in case of a bank collapse.

Specific Failures:

One of HSBC’s subsidiaries, HSBC Bank, incorrectly marked 99% of eligible beneficiary deposits as “ineligible” for FSCS protection. Additionally, the bank provided incorrect evidence about its systems complying with deposit protection rules.

Significance of Failures:

The Bank of England’s Prudential Regulation Authority (PRA) emphasized the seriousness of the failings, stating they significantly undermined the bank’s readiness for potential restructuring. The bank was found to have failed in being open and cooperative with the PRA, not alerting them about identified problems for approximately 15 months.

PRA’s Reaction:

PRA Chief Executive, Sam Woods, highlighted that these serious failings go to the core of the PRA’s safety and soundness objective. He emphasized the importance of all banks complying fully with requirements related to preparedness for resolution.

Reduction in Penalty:

Although the breaches were deemed significant, the PRA did not consider them deliberate or reckless. HSBC’s cooperation during the investigation and early admission of rule violations resulted in a reduction in the penalty. Without these reductions, the fine would have been £96.5 million.

HSBC’s Response:

HSBC expressed its pleasure in resolving the “historic matter” and emphasized its focus on serving customers. The bank’s cooperation during the investigation was acknowledged in the PRA’s final notice.

Previous Regulatory Issues:

This isn’t HSBC’s first encounter with regulatory authorities. In 2021, the bank was fined £63.9 million for unacceptable failings in its anti-money laundering systems. In 2012, HSBC paid $1.9 billion to the US Department of Justice for failing to prevent money laundering by Mexican drug cartels.

Conclusion:

The £57.4 million fine is the second-highest imposed by the PRA, highlighting the severity of HSBC’s failures in safeguarding customer deposits. The banking giant will need to continue addressing and rectifying its regulatory compliance issues.

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