HSBC sets aside £1.3bn to cover cost of scandals

Chief executive says sorry for 'shameful' failures and warns bill may end up much higher

HSBC yesterday set aside $2bn (£1.3bn) to pay for likely sanctions in connection to extraordinary money-laundering allegations in America and mis-selling products to customers in Britain, but warned that the final bill could be much higher.

Chief executive Stuart Gulliver, paid nearly £8m last year, said he was sorry for the "shameful" and "embarrassing" failures to prevent laundering at the biggest bank in Europe. "It's very painful for all of us in the firm," he said.

A US Senate report this month slammed HSBC for letting clients shift funds from dangerous and secretive countries in the latest and probably most dramatic crisis to hit the banking industry. Among those said to have used the bank to clean dirty money are Mexican cocaine lords, terrorists and pariah states such as Iran and Syria.

The scandal has drawn in trade minister Lord Stephen Green, a former chief executive of the bank. He is likely to face questioning by investigators about what he knew and when.

Yesterday HSBC reserved $700m to cover "certain law enforcement and regulatory matters" in America and $1.3bn to pay for claims from customers who were mis-sold payment protection insurance (PPI) and interest rate hedging products.

It did not set aside any money for the Libor or Euribor interest rate rigging scandals, saying it is not possible to measure what the costs could be –but said it is co-operating with inquiries from watchdogs.

It also admits that charges for the other scandals could be "higher, possibly significantly higher" than it has now set aside. The bank said it is profoundly sorry for the pain it has caused customers and shareholders.

A number of people have left the bank as a result of internal inquiries, but HSBC declined to say how many.

In the first half of this year, profits were down 3 per cent to $10.6bn (£6.75bn) – an amount campaigners say shows that banks still do not operate in the public interest.

HSBC chairman Douglas Flint said he finds it "extremely frustrating and infuriating when we discover areas where the behaviour of HSBC has fallen short of the standards we expect... This group is made up of many legal entities around the world, all with their own traditions and heritage, but we have only one reputation". Mr Gulliver is mid-way through a shake-up to cut costs, sell or shrink unprofitable businesses, and to direct investment to faster growing Asian markets.

The bank employs 271,500 full-time staff around the world – 27,500 less than it did six months ago. That is indicative of the jobs squeeze across finance industries.

HSBC made $4.3bn from disposing of certain businesses around the world. The bank notes that it has $150bn on account with the world's central banks, a sign of both its financial strength and the lack of demand for credit, it said.

Last month, Barclays was fined £290m by UK and US regulators for giving false Libor submissions, and other banks are expected to be caught up in the scandal. It also forecast that the eurozone economy would shrink this year.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before