Lord Green of Hurstpierpoint, the former HSBC chairman, has admitted to fellow peers that “we got things wrong” at the bank and said it should have done more due diligence on acquisitions in Mexico and Switzerland that later sullied its reputation.
But he insisted that he was still “proud of HSBC”.
The banker turned trade minister told the House of Lords Economic Affairs Committee he had made his colleagues aware of the issues facing HSBC by pointing to paragraphs in its annual report before his appointment.
He was answering questions about the scandals for the first time, having at one point faced criticism for becoming the “invisible man of government” while scandal was rocking his former employer.
Asked by Lord Forsyth whether he had raised the fact that “there were a whole range of things that suggests compliance wasn’t effective at HSBC” with the Government before his appointment, he said: “I did and I drew attention to the annual report.”
He added that, had he been aware of the true scale of the problems, “I would have done something”.
HSBC paid a then record fine of $1.9bn (£1.2bn) after US regulators said the bank had been used by Mexican drug lords to launder dirty cash. It was also found to have facilitated sanctions-busting by regimes such as Iran.
The bank’s Swiss unit – formerly Safra Bank – is facing prosecution in a number of territories for allegedly facilitating tax evasion by hundreds of wealthy clients.
Lord Green said of the affairs: “I’m not going to say we covered ourselves in glory because it’s not true… Since then they have very substantial reinforced the compliance function and it’s clear we needed to do that.”
However, he defended going ahead with the deals, saying the bank had seen rising demand for private banking, which required an operation in Switzerland, while Mexico was “a large attractive emerging market” that was part of the North American Free Trade Agreement.
“I was on the board and did support the acquisitions and therefore I share in the responsibility. I don’t believe the problems lay in considerations of the merits of the acquisitions,” he argued, pointing instead to a failure to pick up on internal audits and weak compliance.
Since Lord Green’s departure HSBC has substantially beefed up its compliance, adding a small army of more than 2,000 new staff. It has also dropped the “federal model” that had been the way the bank was managed since the 19th century, with single country heads acting as lords of their territories and largely serving as the only conduit between the board and their businesses.
He told committee members: “I’m proud of HSBC. It didn’t get everything right, but one of the things I am proud of is that it says it doesn’t get everything right and then works hard at remediation.”
Lord Green also said some of the pay packages offered to senior bankers were “impossible to justify” on moral grounds. But in common with other senior executives, he argued that HSBC operated in “an international marketplace” and had started to lift wages in the 1990s when it feared it might otherwise lose good people.Reuse content