The outgoing chairman of Britain’s biggest bank, HSBC, has called for an overhaul of financial crime detection as he sounded the alarm over the impact of Brexit and attempts to fragment global financial regulation.
His warning came as HSBC reported a 5% rise in first half profits to $10.2bn (£7.8bn) and announced a $2bn share buy-back, taking the total amount returned to shareholders since the second half of 2016 to $5.5bn.
Douglas Flint – who has been at HSBC for 22 years and chairman for the last six – used his last statement at the bank to call for the rules designed since the financial crisis to be implemented globally, and also warned on the impact of Brexit on Europe’s financial markets.
A divergence in regulation runs the risk of “skewing” financial market activity to where the rules are less onerous, while the discussions over the UK’s departure from the EU will be “complex and time-consuming”.
“The essential questions that have to be addressed are whether, at the conclusion of the negotiations, the economies of Europe will continue to have access to at least the same amount of financing capacity and related risk management services, and as readily available and similarly priced, as they have enjoyed with the UK as part of the EU,” he said.
The City is focused on HSBC’s attempts to clean up its business after a series of scandals about the tax avoidance strategies used by its Swiss arm and the £1.2bn fine for money laundering by the US Department of Justice, which led to a monitor being installed at the bank as part of a deferred prosecution agreement.
The American lawyer Michael Cherkasky was appointed as the monitor five years ago and his concerns have prompted an investigation by the Financial Conduct Authority into potential breaches of money laundering rules.
Flint said there need to be increased cooperation to route out “bad actors”.
“What is.... clear is that greater cooperation between the public and private sectors, together with a refresh of bank secrecy laws and regulation designed for a different age, would significantly increase the effectiveness of our joint efforts,” he said.
Among the ideas he endorsed was a mandatory register of beneficial ownership of corporate and other non-personal structures in every country.
HSBC’s results were accompanied by pages of legal warnings, including a legal case which began in April 2017 into allegations that it conspired with other banks to manipulate the the US bond market. There are other disclosures covering requests for information relating to the Mossack Fonseca files, investigations by tax authorities and its cooperating with the DoJ over the way it packaged up toxic bonds in the run up to the crisis. The investigation by DoJ - which has already reached settlements with eight other banks - is “nearing completion”.
In the UK, the bank’s results included a $300m hit for the payment protection insurance scandal. HSBC said it had moved 170,000 accounts to new sort codes to comply with the new ringfencing rules - known as the Vickers rules - which come into force at the start of 2019. Implementing these rules, which ring fence high street bank operations from riskier investment banks, has cost £500m and involved 2,000 staff.
Stuart Gulliver, the bank’s chief executive, focused on the amount paid out to shareholders in the last year. “In the past 12 months we have paid more in dividends than any other European or American bank and returned $3.5bn to shareholders through share buybacks,” said Gulliver, who in the financial stages of a global plan to make savings of $5bn, cut 25,000 jobs and “pivot” the business towards Asia.
This article was written by Jill Treanor, for theguardian.com on Monday 31st July 2017 08.02 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010