James Moore: It’s a bit rich for HSBC to moan about being strangled by red tape ...
Monday 04 August 2014
Outlook: “Enough,” cried Douglas Flint, the HSBC chairman and banking industry grandee, as he launched a withering attack on the world’s banking watchdogs.
His chairman’s statement atop HSBC’s results painted a picture of an industry strangled by ever more tangled spools of red tape emanating from a multinational corps of regulators.
A small army of HSBC compliance staff are now apparently burning the midnight oil trying to get their heads around the confusing and sometimes contradictory missives from a bewildering array of watchdogs who think nothing of parking their tanks not only on banks’ lawns, but on each other’s too, with little attention paid to the fact that a bit of co-ordination might benefit everyone.
Meanwhile, his sales staff are now so fearful of the consequences of getting it wrong that they aren’t prepared to do much beyond selling the odd deposit account.
From the tone of it you could be forgiven for thinking that this is an industry whose chieftains are gathering for one last single malt before the authorities sound their collective death knell.
Except that, despite it all, HSBC managed to haul in nearly £7.5bn in profits while promising a return to revenue growth in the near future and basking in the glow of gushing commentary from analysts, who simpered over its “robust” capital generation and “resilient” performance.
It’s worth noting that despite all those expensive and vexatious regulatory changes Mr Flint complained about, HSBC still managed to report costs that were a shade lower than last year’s. Are the staff Mr Flint is so concerned about finding it tough because the regulators are sweating them too hard? Or is it because HSBC’s management is.
There certainly won’t be many of them seeing the sort of “one off” seven figure bonuses HSBC’s remuneration committee tried to hand to Mr Flint – no questions asked – for all his extra work dealing with regulators and governments before shareholders kicked up a fuss.
It was barely six years ago that the world’s financial system was teetering on the brink of a collapse that could have made the Wall Street Crash look as if the world had just found itself a bit short after a big night out.
Since then the banking industry has coughed up a succession of ugly scandals, many of which HSBC is in the thick of, as was made abundantly clear by the nearly eight pages devoted to them in the bank’s press statement.
And yet here is Mr Flint having the gall to argue for the abandonment of the UK’s “ring face” around retail banking, that might provide some protection for the consumer, until the end of a competition inquiry that was itself sparked by the failings of the big banks.
The next thing will be for HSBC to start threatening to up sticks and move out of London. Hang on a minute, we’ve already been there, haven’t we?
Mr Flint might have a case when it comes to watchdogs’ failure to communicate and co‑ordinate, making reforms more complicated (and perhaps less effective) than they really ought to be. But he offered no solutions to the issues he raised, just complaints.
His statement demonstrates that the industry, and HSBC in particular, has lost none of its hubris. It is this, as much as anything, that the consumer needs protection from. A hubris ringfence should be raised, and then electrified, without delay.
... but at least it’s going along with what US regulators say
One area of progress for HSBC when it comes to regulators is in the reforms it has instituted to ensure it complies with the rules of regulators based in the US.
The $1.9bn (£1.1bn) fine levied on it for allowing itself to become the world’s local bank to Mexican drug cartels might have only amounted to about six weeks’ profits. But it clearly had an impact (although its probation was arguably the greater penalty).
That being the case, it’s hard to see a French-led move to challenge US mega fines like this at the G20 having much of an impact, even given the rare outbreak of unity it has sparked among the EU’s big guns (the UK and the Germans are both on board).
For a start the US Treasury has a ready answer to the French complaint: obey the rules and you don’t get fined.
But even if the Treasury were minded to listen, it’s not clear whether it would be able to stop the avalanche.
Elliot Schneiderman, the New York Attorney General who is pursing Barclays over the operation of its dark-pool share-trading exchange, might actually welcome a little blowback from his Treasury. It would no doubt help his re-election campaign were he able to portray himself as the champion of the people against the Washington establishment in pursuing banks like Barclays.
Those banks don’t lack for opportunities to fight fines, should they choose to do so, and that’s exactly what Barclays has done in the face of Mr Schneiderman’s lawsuit.
If its motion to dismiss – which in a nutshell argues that Mr Schneiderman erred in law and had poor evidence – fails, Barclays will still get its chance to argue its case before a judge.
The French intervention was, of course, prompted by the treatment of BNP, whose $9bn fine for sanctions-busting makes even the mega-penalty handed to HSBC look like chump change.
There’s a reason, however, why BNP didn’t follow the path Barclays has taken. Its conduct was so outrageous that it would have been hard to see any judge finding in its favour.
As I’ve written before, the French – and the EU – may yet get their chance to indulge in a little quid pro quo should they be minded to do so. It isn’t only European banks that have engaged in dubious conduct over the past decade.
The US reaction to any tit-for-tat measures would be entertaining to watch.
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