One of the world’s largest banking and financial services organizations, HSBC Holdings plc, has been fined 57.4 million pounds ($73 Million), over failure to protect some depositor’s funds over several years.
The UK regulator BoE’s Prudential Regulation Authority (PRA) disclosed that the bank failed to accurately identify deposits eligible for Britain’s Financial Services Compensation Scheme (FSCS), which protects customers cash up to 85,000 pounds.
The rule mandates that lenders ensure critical information is held in order for the FSCS to compensate customers if a firm fails.
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Speaking on the issue, Deputy Governor of the Bank of England and CEO of the PRA, Sam Woods said,
“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.”
However, the PRA said that it did not consider the bank’s breaches to be deliberate or reckless. It disclosed that the bank’s cooperation throughout the investigation, including admitting early on that it had broken rules, resulted in a reduction in the penalty
Without these reductions, reports suggest that HSBC would have been fined £96.5m. HSBC further highlighted its commitment to remain focused on serving its customers efficiently.
“The PRA’s final notice recognizes the Bank’s co-operation with the investigation, as well as our efforts to fully resolve these issues,” the bank said.
It is however worth noting that this is the second largest fine the PRA has imposed to date. The highest fine was £87m imposed on Credit Suisse in July 2023.
The Prudential Regulation Authority fined Credit Suisse International and Credit Suisse Securities (Europe) Ltd £87 million for significant failures in risk management and governance between 1 January 2020 and 31 March 2021, in connection with the Firms’ exposures to Archegos Capital Management.
The regulator disclosed that the Firms’ risk management oversight and practices fell well below the regulatory standards required. The failings were found to be symptomatic of an unsound risk culture within the business line that failed to balance considerations of risk against commercial reward appropriately.
Broadly, this resulted in a failure by the Firms to address the risk arising from Archegos’ portfolio, a confusion of responsibilities, and failures to adequately respond when limit breaches were exceeded.
The Prudential Regulation Authority (PRA) is a United Kingdom financial services regulatory body, formed as one of the successors of the Financial Services Authority (FSA). The PRA’s role is defined in terms of two statutory objectives: to promote the safety and soundness of the firms it regulates.
In promoting safety and soundness, the PRA focuses primarily on the harm that firms can cause to the stability of the UK financial system.