HSBC is suffering “horrible reputational damage” as a result of the exposure of the systematic aiding of tax avoidance in its Swiss subsidiary, the bank’s chairman has conceded before MPs.
Douglas Flint told the Treasury select committee on Wednesday that he blamed the failings at the Swiss unit on its management, and said secrecy surrounding banking in the country made it difficult for him to have a direct line of sight of what has happening at the bank.
Chairman of the bank since the end of 2010, Flint was finance director at the time the Swiss subsidiary was purchased by HSBC. He also insisted he took personal responsibility for decisions for which he had direct accountability.
Flint, the chair of Europe’s biggest bank, was also confronted with a daunting list of charges the bank was facing, including some current investigations.
The committee chairman, Andrew Tyrie, said the bank had been accused of “interest rate derivative selling, Libor manipulation, Eurobor manipulation, mis-selling mortgages to Fannie Mae and Freddie Mac, Forex rigging, weakness in money laundering, credit default swaps, … rigging precious metals” and was involved in “various class action lawsuits over the Bernie Madoff fraud … [I think I missed one].”
“It’s a terrible list,” Flint admitted, as he apologised to parliament over the conduct of the bank, although he added that HSBC had not been fined over Libor rigging.
The chairman also described the leak of the data as theft, prompting outrage from MPs angry that he had condemned the whistleblowing that had exposed criminality at the bank.
Stuart Gulliver, HSBC’s chief executive, was also asked about his pay arrangements. He conceded that it looked strange that his salary while he was at HSBC in Hong Kong had been placed into a Panamanian account, but he insisted he had made no tax benefit as a result.
He said he had made the arrangement in 1998 purely to hide his large salary from other HSBC staff who might have been able to see it. “I can understand how people find these kind of arrangements unusual and rather strange.”
He added: “We had a computer system back in the day that allowed everybody to inquire into staff accounts … I was amongst the highest paid people and I wished to preserve my privacy from colleagues. Nothing more than that.”
Gulliver also accepted that he was registered as a non-domicile in the UK even though he had been working in Britain for 20 years.
The two senior bankers were repeatedly pressed to identify those responsible for allowing HSBC’s Swiss operation to aide tax evasion and asked whether the former HSBC chairman Stephen Green, a former Conservative trade minister, was responsible.
The men said there was a collective responsibility and the tax secrecy reflected a culture in Switzerland in the 2000s – an explanation that frustrated many on the committee.
“It clearly was unacceptable, we very much regret this and it has damaged HSBC’s reputation,” Gulliver told the committee. “I am responsible for clearing it up. I have made substantial changes. It was clearly unacceptable. We very much regret this.”
Gulliver said he had changed HSBC from a federal structure to a more centralised one since becoming chief executive in 2011 and sold off 77 businesses. He added: “I’ve been with the group for 35 years. I am responsible for cleaning it up, so I have made substantial changes … I wasn’t running the private bank at that point in time, but I have spent 35 years working with HSBC, so there is a proximity issue.”
Flint said: “One of the most humbling things that has happened in my career is a recognition of all the things you did not know, and you go and say: ‘What could I have known or what should I have known?’
“What these instances have illustrated, or brought to the fore, is that allowing interpretation at 88 countries as it was at the time is the wrong way to go and we should centralise control.”
Asked who was responsible for introducing the federal structure, Flint said: “Each chief executive decides the organisation structure that he thinks best fits the control environment of the firm. I think that the regional structure worked very well until it clearly didn’t. And now it has been changed.”
Both bankers insisted they had not discussed the activities at HSBC’s Swiss arm with anyone at the Treasury, but said they had held two meetings with HM Revenue and Customs.
“Certainly, I did not discuss the Swiss case with anyone in the Treasury,” Gulliver said. Flint added: “I don’t believe so, I believe all our discussions were with HMRC.”
Gulliver also insisted that the bank had not used its UK newspaper advertising budget to manipulate editorial coverage, but he said some adverts due to be placed in the Daily Telegraph had been postponed, not cancelled, when the paper highlighted HSBC’s activities in Jersey. He said there would have been no commercial point placing the adverts in the newspaper.
The HMRC chief executive, Lin Homer, told the committee that the French tax authorities had just given HMRC permission to share data with other Whitehall departments to track down criminal activity.
She said the first multi-agency meeting on the issue will be held next week.
This article was written by Patrick Wintour, political editor, for theguardian.com on Wednesday 25th February 2015 17.49 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010