HSBC slapped with £10.5m fine

5th Dec 2011 13:38

The Financial Services Authority (FSA) has levied a £10.5m fine on HSBC, the UK's largest bank, after it mis-sold five-year bonds to the over 80s.The penalty is the biggest fine ever to be slapped on a firm in the City for this type of misdeed. The banking giant sold the bonds to nearly 2,500 elderly customers who were advised to buy the products as a way of funding their long-term care. The FSA found that the five-year bonds were longer than the life expectancy of the average customer, who would have been aged 83. The FSA said that because of this, "customers with shorter life expectancies had to make withdrawals from these investments sooner than is recommended", which resulted in a quicker rate of capital reduction than that of an alternative investment solution. The bank's subsidiary, NHFA, will also have to pay in the region of just under £30m to compensate the customers for the poor advice they received. HSBC closed its NHFA subsidiary to new business in July and alerted the FSA, after spotting the problems. Partly for this reason the FSA has given the bank a 30% discount on the fine.Figures suggest that each customer invested around £115,000 into the bank between 2005 and 2010. Brian Robertson, chief executive of the UK division of HSBC, has said he is "profoundly sorry" and that he will "guarantee that every customer who is found to have not been treated fairly will not be disadvantaged."NR