Explosive revelations at HSBC's US Senate meeting

HSBC yesterday put itself at the mercy of the US Senate, acknowledging shortcomings in its anti-money laundering operations and revealing the resignation of a global executive.

David Bagley, a top compliance executive at HSBC since 2002, told a Senate investigative panel that he would step down, after the panel released a scathing report calling out a "pervasively polluted" culture at the bank. The Senate report, which came after a year-long inquiry, said the bank had routinely acted as a financier to clients routing funds from the world's most dangerous corners, including Mexico, Iran and Syria.

While the bank's money-laundering problems have been flagged by regulators for nearly a decade, the report and hearing escalate pressure on the bank, as it awaits a massive fine from the Justice Department for lapses in its safeguards.

It also comes as international banks' reputations have taken a fresh blow due to allegations of a manipulation of a key global benchmark rate.

Senator Carl Levin, who chairs the Senate's Permanent Sub-committee on Investigations, kicked off the hearing on Tuesday with an extensive explanation of how HSBC's lapses have been a threat to financial markets around the world. "Accountability for past conduct is essential. That's what's been missing here," Levin said, adding that the bank's charter could be at risk if it did not do better.

The hearing started with officials from the US Treasury and Department of Homeland Security, but the fireworks began when HSBC executives came to testify.

Bagley, HSBC's head of group compliance since 2002, told the hearing that changes at the bank meant it was time for him to go. "Now is the appropriate time for me and for the bank, for someone new to serve as head of group compliance. I have agreed to work with the bank towards an orderly transition," he said.

HSBC's mea culpa began: "We will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect."