Customer Deposit Fiasco Costs HSBC a $73 Million Fine

<p>HSBC has
been issued a penalty of £57.4 million ($73 million) by the UK's Prudential
Regulation Authority (PRA) over "serious failings" in protecting some
customer deposits as required under British banking rules.</p><p>HSBC fined $73 million by
UK regulator for deposit protection failures</p><p>The fine,
the second-largest ever imposed by the PRA, relates to issues at HSBC Bank plc
between 2015-2022 and HSBC UK Bank plc from 2018-2021, where the banks failed
to accurately identify and mark deposits eligible for protection by the UK's
Financial Services Compensation Scheme (FSCS).</p><p>Specifically,
the PRA found one HSBC unit had incorrectly marked 99% of eligible beneficiary
deposits as ineligible. As a result, the regulator determined HSBC's
shortcomings would have "materially undermined" efforts to resolve
and unwind the banks in an orderly way.</p><p>"It is
vital that all banks comply fully with our requirements around preparedness for
resolution," <a href="">commented</a>
Sam Woods, the Deputy Governor for Prudential <a href="">Regulation</a> and the Chief
Executive Officer of the PRA. "HBEU fell far short of its <a href="">obligations</a> in
this area, and failed to disclose its failings to us in a timely manner."</p><p>HSBC cooperated
during the PRA's investigation and committed to resolving the identified issues.
The initial proposed fine of £96.5 million was reduced 40% to £57.4 million
as a result.</p><blockquote><p lang="en" dir="ltr">The Prudential Regulation Authority (PRA) fines HSBC £57.4m for historic failures regarding deposit protection account marking and delays informing the PRA. Read more here: <a href=""></a></p>— Bank of England (@bankofengland) <a href="">January 30, 2024</a></blockquote><p>Deposit Protection up to
failings relate to UK requirements for banks to have systems and controls in
place to identify FSCS-protected deposits of up to £85,000 per customer. This
is intended to enable rapid payouts to eligible customers should a bank fail.</p><p>This
protection applies to banks, building societies, and credit unions in the UK.
The £85,000 limit is per eligible depositor per authorized institution. It does
not apply per account. For joint accounts, the limit is £170,000 covering both
account holders. The £85,000 limit refers to the total amount held across all
accounts at that institution. </p><p>So if you
have money deposited at multiple banks within the same banking group, your
deposits are still only covered up to £85,000 in total.</p><p>Long List of HSBC's Fines</p><p>This is another multi-million fine for HSBC, <a href="" target="_blank" rel="follow">following a payment of $45 million</a> made in May 2023 in the United States for "manipulative and deceptive trading" practices allegedly committed between 2012 and 2015. However, these are not the largest fines in HSBC's history. </p><p>For instance, in 2018, the institution was <a href="" target="_blank" rel="follow">fined $101.5 million</a> as part of a settlement with the U.S. Department of Justice related to investigations into currency rate manipulations. In 2017, HSBC had <a href="" target="_blank" rel="follow">to pay $175 million</a> for "unsafe forex trading." The UK lender lacked sufficient oversight and controls over its FX traders, who were reportedly discussing trading positions with competitors through electronic chatrooms, according to the Board. </p><p>One of the largest fines paid by the bank was in 2015, when it <a href="" target="_blank" rel="follow">agreed to pay $285 million</a> in a settlement related to a case of financial market manipulation.</p><p>The Bank of England
Publishes New Enforcement Policies</p><p>Following
consultations, the Bank of England and the PRA have released a new
policy statement today (on Tuesday), detailing an updated approach to enforcement for
both PRA-regulated firms and financial market infrastructure entities. This
includes modifications to the operational procedures of the Bank's Enforcement
Decision Making Committee. </p><p>The updated
policies introduce a framework encouraging early collaboration and providing
more incentives for prompt admissions aimed at expediting investigations where
suitable. Additionally, new policy outlines the PRA's approaches and methods
for issuing supervisory and non-enforcement statutory notices. The recent
penalty imposed by the PRA on HBEU and HBUK was based on the PRA's existing
penalty policy.</p><blockquote><p lang="en" dir="ltr">The Bank of England and the Prudential Regulation Authority (PRA) have published their policy statement PS1/24 setting out revisions to their enforcement policies and procedures. Read the new PRA policies here: <a href=""></a> <a href=""></a></p>— Bank of England (@bankofengland) <a href="">January 30, 2024</a></blockquote><p>In 2024,
the Bank plans to propose further revisions to its enforcement policies, in
line with the new powers it received under the Financial Services and Markets
Act 2023.</p><p>Participate in Our Fraud Survey: Your Opinion Matters!</p><p>We invite you to participate in our joint survey conducted by FXStreet and Finance Magnates Group, which explores prevalent online financial fraud types, platforms used for fraudulent activities, effectiveness of countermeasures, and challenges faced by companies in tackling such fraud. Your valuable insights will help inform future strategies and resource allocation in combating financial fraud.</p><p><a href="" target="_blank">Social Media Scams: Help Shape the Fight with Your 2024 Survey Participation</a></p>

This article was written by Damian Chmiel at

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