Britain’s biggest bank, HSBC, has been slapped with a record £10.5 ($16.4) million fine, and ordered to repay £29.3 million to elderly investors after authorities found it guilty of mis-selling scandal involving almost 3,000 vulnerable elderly customers living in care.
According to media reports, HSBC was found guilty of selling investment products to elderly customers that were not suitable for them.
Its NHFA subsidiary, previously known as Nursing Home Fees Agency, advised some 2,485 customers, with an average age of 83, to buy into five-year bonds to fund their care, even though many of them were likely to die before the investment term was up, Britain’s Financial Services Authority said.
In a statement by the FSA, HSBC, who sold off the NHFA in July, had given "inappropriate investment advice" to elderly customers and added that the Bank would have to pay an additional £29.3 ($45.8) million in compensation. The £10.5 million fine levied by the FSA is the largest on a retail banking corporation, and the fifth largest overall.
NHFA was trusted by its vulnerable and elderly customers. It breached that trust to sell them unsuitable products. This type of behaviour undermines confidence in the financial services sector, said Tracey McDermott, the FSA's acting director of enforcement and financial crime.
Ninety percent of the elderly investors had put in an average of £115,000 – often the proceeds from the sale of the family home.
In response, HSBC’s UK chief executive Brian Robertson said: “I fully accept that NHFA failed to give suitable financial advice to some of their customers.”
This should not have happened and I am profoundly sorry it did, Robertson added.
HSBC received a 30 percent discount on its penalty for flagging the mis-selling to the FSA.
The scandal came to light after HSBC announced it was cutting 550 jobs in the UK in response to a “very challenging” economic environment.
In response, Unite union-chief David Fleming criticised the Bank saying: “"For the hugely profitable HSBC bank to announce 551 job cuts, just three weeks before Christmas, is disgraceful. Unite has urged the bank to reconsider this decision which will cause unhappiness for staff during the holiday period.”
On the day when HSBC has been fined £10.5 million for giving inappropriate advice to elderly customers, it is bizarre that it would choose to make staffing cuts. Instead the bank should be working to improve the quality of its service, Fleming said.