HSBC’s chief executive conceded in front of MPs that his personal tax and banking affairs were further damaging the reputation of the scandal-hit bank.
Stuart Gulliver was giving evidence for the second time in three weeks at a stormy parliamentary hearing into “industrial scale” tax avoidance at HSBC’s Swiss subsidiary.
Margaret Hodge MP, chair of the public accounts committee, opened the hearing by cataloguing Gulliver’s tax and banking arrangements, which show he is not domiciled in the UK and has used the bank’s Swiss arm for his own accounts.
“How can I as an HSBC client have confidence in someone like you?” the Labour MP asked.
Pressed by committee members on whether his private affairs had tainted the bank, Gulliver said: “I would agree with you that it has caused reputational damage to the bank in some quarters.”
He added: “My tax affairs are in order and I have carried out widespread root and branch reform to HSBC since becoming chief executive five years ago.”
Despite being born and educated in the UK, Gulliver is now a non-dom, having changed his domicile to Hong Kong for tax purposes. He was also one of HSBC’s first Swiss private banking customers, having opened an account 17 years ago, which he said was to to hide the level of his bonus payments from his colleagues. The accounts eventually held £5m, via a Panamanian company.
Also giving evidence were Chris Meares, who was head of global private banking with oversight of the Swiss bank from 2006 to 2011, and HSBC non-executive director Rona Fairhead.
The packed hearing was attended by a delegation from Argentina, which today launched legal action to try to force HSBC to repatriate $3.5bn hidden in its Swiss bank by Argentinian citizens. Fairhead blamed the bank’s frontline staff and Swiss managers.
MPs expressed their frustration at the fact that none of HSBC’s management had yet stepped forward to take individual responsibility. “You are all so ruddy evasive,” said Hodge. “You are evading the evasion.”
Under intense questioning, interrupted when one anti-HSBC campaigner was marched out by police after attempting to put his own questions to the witnesses, Gulliver conceded certain practices had put the bank’s probity at risk.
He was pressed in particular on the hold mail service, which made it possible for customers keen to keep their accounts secret from their own governments to collect their statements and other mail from bank offices rather than having paperwork sent to their homes. The bank would often destroy the documents after they had been read.
It was claimed that 18,642 customers of the private bank were availing themselves of the hold mail service when HSBC decided to abolish it, 14,868 of them in Switzerland. There are still 12 clients who use hold mail.
Asked what why clients used hold mail, Gulliver said: “It could be that the mail in your country is unreliable. The higher probability is that someone wishes their affairs to be kept from the country in which they ought to be paying their tax. As I started to de-risk and change the firm it struck me as a high risk area.”
Meares, who is now chairman of London investment firm Quilter Cheviot, told the committee he spent 20% of his time in Switzerland and met with the head of the Swiss bank about once a month. He said his first indication of wrongdoing came when he received a letter from the Guardian in January this year.
Meares said: “I was not personally accountable for the individual actions of individual managers in the Swiss bank but I absolutely share responsibility for anything that may have happened on my watch.”
Despite being pressed more than a dozen times by Conservative MP David Burrowes to say whether he took personal responsibility for failings in Geneva, which represented 30% of the global private banking operations which he oversaw, Meares declined to give a yes or no answer.
Phillips challenged Meares about how much he knew of the wrongdoing while in post: “Either you were completely incompetent in your oversight duties or you knew all about it. I don’t believe you didn’t know. This was tax avoidance on an industrial scale.”
Gulliver was also urged to resign. Conservative member Stephen Phillips said: “Wouldn’t the sensible thing to be to stand aside and let the board replace you?”
“I would like the chance to finish what I’ve started,” Gulliver replied.
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