UK is rumored to require HSBC Holdings (HSBC.US) to review data manipulation to address risk management flaws

The Zhitong Finance App learned that, according to reports, British regulators requested HSBC Holdings (HSBC.US) to review its methods of collecting and monitoring large amounts of data, which supports the company's risk management system in the field of investment banking and trading.

People familiar with the matter revealed that the UK Prudential Supervisory Authority (PRA) has instructed HSBC to review its data operations in commercial banks, global banks and markets in accordance with section 166 regulations. These reviews forced companies to bring in outside experts to examine their practices and issue an independent report for the authorities.

A UK Prudential Supervisory Authority spokesperson and an HSBC representative declined to comment.

Documents seen by the media show that three years ago, regulators pointed out that HSBC's risk management capabilities were flawed in nine areas. In response to earlier actions, HSBC has developed a plan called “Risk 2025” to address these flaws by next year.

However, with only a few months left until the regulatory deadline, the UK Prudential Supervisory Authority found that HSBC still has flaws in four key areas, namely model risk, risk data quality, transaction risk, and credit risk. The UK Prudential Supervisory Authority has ordered an updated professional review, hoping that outside experts can submit a report explaining how HSBC plans to address its credit risk and transaction risk flaws.

It is unclear whether this review will have results. These investigations may lead to reforms at HSBC, which in some cases may be large-scale and costly.

This is not the first time this year that HSBC has been targeted by the UK Prudential Supervisory Authority. In January of this year, the regulator fined HSBC £57.4 million ($75.3 million) because the bank mistakenly excluded billions of pounds of customer funds from saver protection programs.

The UK Prudential Supervisory Authority said at the time that this was the second largest fine issued by the supervisory authority, reflecting the “seriousness of the mistake” that occurred between 2015 and 2022.