HSBC accused of prejudice

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The Independent Online
HSBC's attempt to buy America's leading private bank has been challenged by a New York-based political group which has accused it of discriminating against minorities in the US.

The British bank has bid $10.3bn (pounds 6.4bn) for Edmond Safra's Republic New York Corporation. But Inner City Press/Community on the Move claims that the bank's US unit, Marine Midland, has a weak record in lending to non-whites and the poor.

American analysts do not expect the challenge, which was lodged at the Federal Reserve Board and the New York State Banking Department, to succeed in stopping the merger, but they say it could delay approval.

"We are aware a statement has been published on the internet," an HSBC spokesman said. "We expect US regulators will invite our comments. We shall respond and are confident the challenge won't delay our application."

The challenge, filed on 24 June, alleges that HSBC has a "weak record of lending to low- and moderate-income neighbourhoods and to people of colour," and notes "HSBC's history of closing branches, including, recently, its only consumer facility in the South Bronx of New York City."

The group says it reviewed government-supplied home mortgage disclosure data for 1997 and found that "HSBC's bank and mortgage company combined to deny 11.9 per cent of applications from whites, while denying 22 per cent of applications from Latinos" in New York City.

Analysts say the data used by ICP is subject to interpretation. They point out that US legislation passed to stop US banks from "redlining" - tacitly staying out of poor neighbourhoods - has resulted in a spate of such challenges and virtually none has succeeded.

Matthew Lee, ICP's executive director, contends that challenges like his against HSBC and other equivalent challenges have nonetheless affected the way US banks now go about merging. "We are asking for public hearings on the merger," he said. "If they're approved, the normal 30-day approval period will get extended."

Mr Lee also makes a comparison with HSBC's prospective acquisition of Republic and other recent bank combinations in the US. Citicorp and Travelers Group pledged to set aside $115bn over 10 years in credit for poor and moderate-income customers when they merged last year, he says. Chase Manhattan and Chemical pledged $18bn over five years when they merged four years ago.

"HSBC has made no such pledge," Mr Lee said. He accused HSBC of being a "stealth player" in an attempt to win regulatory approval without making a pledge.