This marks the second-largest fine ever imposed by the PRA. The initial fine £96.5m but received reductions totalling 45% due to the bank’s cooperation in the investigation and its willingness to settle the matter.

The PRA’s investigation revealed that HSBC failed to accurately identify customer deposits eligible for protection under the Financial Services Compensation Scheme (FSCS). It incorrectly marked 99% of its eligible beneficiary deposits as ‘ineligible’ for FSCS protection.

The FSCS requires banks to establish robust systems and controls to assist regulators in identifying customers entitled to protection in the event of a bank failure.

Sam Woods, deputy governor for Prudential Regulation and CEO of the PRA, 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.

“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 regulator highlighted that these failings had a significant impact and that they “undermining the firm’s readiness for resolution”. Additionally, HSBC was reprimanded for not being forthcoming and cooperative with the PRA, as it failed to promptly alert them over a 15-month period about issues related to the incorrect marking of accounts as ‘eligible’ for FSCS protection.

In response to the fine, HSBC told the Financial Times: “The PRA’s final notice recognises the bank’s cooperation with the investigation, as well as our efforts to fully resolve these issues. We continue to remain focused on serving our customers.”