A leading High Street bank admitted today that it had lost a disc containing the personal details of 370,000 of its customers.

HSBC is now facing the prospect of an investigation by the Financial Services Authority, the City watchdog, into its data security.

The missing disc contained the names, dates of birth and insurance cover levels of people with life assurance at the bank, generally linked to a mortgage. It also includes health details, such as whether a person smokes.

The disc went astray about six weeks ago, after being sent by Royal Mail from the group’s offices in Southampton to Swiss Re, a financial company that reinsures HSBC's life insurance.

It is not clear whether the disc was sent to one of Swiss Re's UK offices or to Switzerland, and it appears not to have been sent in the registered mail.

"We're still checking but possibly not, because then someone would have signed for it," an HSBC spokesman told Times Online. "We don't actually know how the disc was lost.

"This is a unique situation, in that we would not normally send info like this. We normally encrypt the information and send it via electronic transfer, but on the day the system wasn't working. It was not our finest hour."

The bank discovered the loss after Swiss Re reported in mid-February that it had not received the disc. It is understood that the data was password-protected, but not encrypted.

"Clearly we are still trying to find the disc. We should have encrypted the disc as well," added the spokesman.

HSBC has informed the FSA about the breach, and faces being fined if the regulator decides that it failed to put proper systems in place to protect customers’ data.

Last December the FSA fined the Norwich Union £1.26 million for not having effective controls in place, enabling fraudsters to get hold of customers’ details and cash in £3.3 million of policies.

Nationwide was also fined £980,000 last year after a laptop which contained confidential customer details was stolen from an employee’s home.

HSBC has not set up a dedicated line for concerned customers, but call centre staffed have been briefed to answer questions

The bank issued a statement reassuring customers that the information on the disc would be of "very limited, if any, use to criminals".

It said: "The data, which was password-protected, includes names, life insurance cover levels, dates of birth and whether or not a customer smokes. There is nothing else that could in any way compromise a customer and there is no reason to suppose that the disc has fallen into the wrong hands.

"HSBC would like to apologise to its life assurance customers for any concern this may cause them. Each customer will be contacted shortly and a thorough investigation into this matter is under way."

The FSA declined to comment on an individual case.

HM Revenue & Customs last year lost computer discs containing the names, addresses, dates of birth, child benefit numbers, National Insurance numbers and bank or building society account details of 25 million child benefit recipients.

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