The PRA has fined
The PRA has fined
HSBC Fine
The Depositor Protection Rules require firms to put in place adequate systems and controls, and governance, to ensure the integrity of critical information which the FSCS relies upon to make prompt payments to depositors in the event of a firm failure. HBEU's depositor protection failings were so significant the PRA determined that it had materially undermined the firm's readiness for resolution.
HBEU also failed to be duly open and cooperative with the PRA in not alerting the PRA over an approximately 15-month period about problems identified in the incorrect marking of accounts as 'eligible' for FSCS protection. This was clearly information which the PRA would expect firms to share fully and in a timely way.
This meant the Firms breached Fundamental Rules 2 and 6, as well as Depositor Protection Rules 11, 12 and 14. HBEU was also found to have breached Depositor Protection Rule 50, and Fundamental Rules 7 and 8. This is the first PRA enforcement action in relation to Fundamental Rule 8, which states that firm must prepare for resolution so, if the need arises, it can be resolved in an orderly manner with a minimum disruption of critical services.
'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. HBEU fell far short of its obligations in this area, and failed to disclose its failings to us in a timely manner. These failures led to today's action, including the significant fine.'
The Firms' failings included:
The failure to assign clear ownership for the processes required under the Depositor Protection Rules; and
The failure to ensure that a senior manager, under the Senior Managers and Certification Regime, was allocated responsibility for these processes and the integrity of the information required under the Depositor Protection Rules.
HBEU's failings further included:
Incorrectly marking 99% of its eligible beneficiary deposits as 'ineligible' for FSCS protection;
Providing an incorrect attestation to the PRA confirming its systems satisfied certain requirements of the Depositor Protection Rules; and
Failing to produce finalised versions of annual reports required to be signed by its board of directors that confirmed compliance with the requirements of the Depositor Protection Rules for multiple years.
The Firms' cooperation throughout the investigation, including the early admission of certain rule breaches, resulted in a 15% reduction to the penalty. The Firms agreed to resolve the matter and therefore qualified for a further 30% reduction in the fine. Without these reductions, the fine imposed by the PRA would have been
The
Following a period of consultation, the
The Bank expects to consult on further amendments to its enforcement policies in 2024, reflecting the additional powers granted under the Financial Services and Markets Act 2023.
Notes to editors
HSBC Final Notice Opens in a new window
Policy Statement PS1/24
Both HBUK and HBEU are wholly owned subsidiaries of
This is the second largest fine the PRA has imposed to date. The highest fine was
The PRA's approach to enforcement: statutory statements of policy and procedure
Supervisory statement SS 18/15: Depositor and dormant account protection
The Firms breached Fundamental Rules 2 and 6, as well as Depositor Protection Rules 11, 12 and 14. HBEU was found to have breached Depositor Protection Rule 50, and Fundamental Rules 7 and 8.
Fundamental Rules Opens in a new window: Fundamental Rule 2 - A firm must conduct its business with due skill, care and diligence; Fundamental Rule 6 - A firm must organise and control its affairs responsibly and effectively; Fundamental Rule 7 - A firm must deal with its regulators in an open and co-operative way, and must disclose to the PRA appropriately anything relating to the firm of which the PRA would reasonably expect notice; and Fundamental Rule 8 - A firm must prepare for resolution so, if the need arises, it can be resolved in an orderly manner with a minimum disruption of critical services;
Depositor Protection Rules Opens in a new window: Depositor Protection Rule 11 - Marking and information requirements; Depositor Protection Rule 12 - Single customer view requirements; Depositor Protection Rule 14 - Single customer view and exclusions view reporting; and Depositor Protection Rule 50 - Transitional provisions: single customer view.
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