James Moore's Outlook: Pearl River Delta euphoria and possibly a sharp wake-up call

HSBC's latest results weren’t pretty - and that’s just the numbers

It calls itself the world’s local bank – a pity that HSBC isn’t living up to it when it comes to its upper echelons (Corbis)

How does all the loud applause and talk about HSBC’s decision to stay put in London being a vote of confidence in the capital look now, after this latest set of results?

They weren’t pretty, and that’s just the numbers, which Investec’s ever-readable Ian Gordon described as “disappointingly weak” and “a miss”.

Of considerably more concern, however, should be the bank’s regulatory issues.

I’ve often lampooned chief executive Stuart Gulliver in this column for the way he goes into something resembling religious ecstasy at the mere mention of China’s Pearl River Delta, but the bank has established formidable positions in businesses across Asia.

What is now coming into focus is the means it has used to establish some of those positions.

Hidden away on page 454 of the 502-page opus of its report and accounts is the bank’s disclosure of an investigation by America’s powerful Securities & Exchange Commission into “hiring practices of candidates referred by or related to government officials or employees of state-owned enterprises in Asia-Pacific”.

Popularly known as “princelings”, their employment by businesses operating in the region, to nebulous roles with fancy titles and fancier salaries, can serve as a subtle form of corruption.

At this stage there is no suggestion that HSBC has engaged in that sort of corruption. We only know that the SEC is interested. And that the impact on HSBC if it discovers things it doesn’t like “could be significant”.

That, however, is just your starter for 10. HSBC also has a connection to the Fifa scandal, with the US Department of Justice investigating the possible processing of improper transactions. Once again little is known other than the fact that if the DoJ discovers things it doesn’t like the impact “could be significant”.

There’s more. Multinational agencies are looking at the fixing of precious metal prices. Just like the above two examples, there is no predictable timescale, and no estimation as regards the potential impact on the bank, other than it “could be significant”.

You can see a theme developing here.

But it gets worse. The most significant penalty the bank has faced was the $1.9bn (£1.3bn) unveiled in 2012 to settle with US authorities as a result of it becoming the bank of choice for some of Mexico’s drug barons. Plus busting US sanctions.

The monitor appointed by the US authorities to oversee the cleaning of house has expressed significant concern about the time that is taking, and whether the work will be done to their satisfaction within the five-year period of the deferred prosecution agreement HSBC signed.

I’ve scarcely got the space to talk about litigation related to the fraudster Bernie Madoff, or the vexed subject of HSBC’s Swiss tax unit, the lawsuits still working their way through the system that relate to Libor and foreign exchange rate fixing, and so on.

Gulliver is paid more than £7m for presiding over that little lot. He’s planning to cut thousands of jobs to improve those disappointed financial results, but even when he’s done HSBC will still employ the population of a small City spread across the globe.

So it shouldn’t be terribly surprising that things like this keep cropping up. When the boss gets excited about something, like the Pearl River Delta, or whatever else is the flavour of the month, or just about finding ways of making money when the results don’t look good, the people beneath him will do their damndest to make it happen. Unfortunately, that sometimes sees them cutting corners.

This is what happens when you allow institutions to get too big to effectively manage. Remind me again why London is celebrating being the venue for this?

Favourable climate with a good chance of complaints

One of the reasons HSBC stayed put was that the “political and regulatory climate” in the UK had become more to its liking. And to the banking industry in general.

Taxes have been eased, regulation softened, reviews into things like culture dropped. That should making us deeply uncomfortable and this morning the Financial Ombudsman will provide another demonstration as to why.

The figures it will release are for complaints against individual firms and they are, as ever, a mixed bag. The most disturbing aspect is that Lloyds, the biggest retail bank in the UK, saw 45,585 complaints going to the ombudsman as a group (including all subsidiaries), nearly as many as Barclays, RBS and HSBC combined. It was the only one of the big four to see a rise (8 per cent) compared with the previous six months.

It would be easy enough at this point to call for more and tougher regulation to bring the banks into line. Which, of course, isn’t going to happen. If it was, HSBC would have set sail for Hong Kong.

The solution, then, is down to us. If numbers like that, or the stories I’ve outlined above, appall you then take advantage of the improved account switching service now on offer and move.

It is true, as I revealed a couple of weeks ago, that the bad-old-days RBS appears on the CVs of the bosses of around half the so called “challenger banks”. But it isn’t hard to avoid them.

Call it DIY regulation. It might be the best regulation we can get, given the softly, softly approach to the City now favoured in Westminster.