HSBC needs to do more to protect the financial system from “bad actors”, the bank’s chairman admitted to shareholders on Friday.
Addressing investors during often heated exchanges at the bank’s annual general meeting, Douglas Flint referred to the 2,300 companies that Britain’s biggest bank and its affiliates had created through the Panama-based law firm Mossack Fonseca.
Only 5% of the companies were still in existence, he said, and insisted it was no longer possible to open such accounts without transparency.
The unprecedented leak of of 11.5m files from the Panamanian law firm Mossack Fonseca has prompted anger worldwide at the way wealthy individuals can hide their money offshore. Flint said the revelations predated the tougher rules about financial crime, regulatory compliance and tax transparency standards implemented in recent years.
“We are taking steps to align our customer base with these higher standards, relinquishing clients unable or unwilling to furnish full transparency of their affairs,” said Flint. “We are committed to working with the relevant public authorities to fight financial crime and keep criminals out of the financial system.”
However, he admitted there was more to do. “We are, however, not yet where we need to be...HSBC’s determination to address emerging risks and enhance our ability to identify bad actors remains resolute,” said Flint, who has said he will leave HSBC next year after 20 years on the board.
He provided little information about when his successor might be chosen. The non-executive director rumoured to be being lined up for the role - Henri de Castries, the outgoing boss of French insurer Axa - refused to comment on whether he was a candidate.
At the meeting Flint had an ill-tempered exchange with one private investor who regularly attends the AGM, Michael Mason-Mahon, who waved handcuffs as a “US bonus” – a move Flint said was “completely out of order”. Mason-Mahon said he would vote against the chairman’s re-election to the board, although 96% of shareholders voted in favour.
HSBC’s admission in its annual report that an official monitor had raised “significant concerns” about the slow pace of change to its procedures to combat crime sparked questions from shareholders about whether the bank would lose its US banking licence. The monitor was imposed by US regulators after the bank was fined £1.2bn in 2012 for failing to implement money-laundering controls, allowing Mexican drug traffickers to deposit hundreds of thousands of dollars a day in HSBC accounts.
Flint insisted the bank was doing everything it could to appease American regulators and likened the monitor’s report to his own school reports – “a report card that says we know you’re committed ... but there’s more to do”.
Unlike last year, when one in four investors failed to support the remuneration report, this year the bank averted a row over pay by announcing changes to cut pay by 7%. This year 90% voted to support the pay report – covering last year’s rewards – and 96% for the pay policy, which covers pay deals for the next three years.
The pay of chief executive Stuart Gulliver was reduced to £7.3m in 2015, a year in which profits remained flat at £13.2bn. The share price was 611p at the time of last year’s AGM but is only about 468p now.
The bank reiterated its warning that it would move jobs to France if the UK voted to leave the EU. Flint said there would be a “period of great economic uncertainty in the event of a vote to leave and should the UK economy slow and economic conditions deteriorate as our research suggests, in at least the short to medium term, this would affect many of our customers in the UK and the economic environment we operate in”.
This article was written by Jill Treanor, for theguardian.com on Friday 22nd April 2016 16.51 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010