September 18, 2020

HSBC CEO says Swiss tax saga was product of a different era

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Screen Shot 2015-02-26 at 8.55.05 AMBy Gavin Finch and Stephen Morris From Bloomberg

(Bloomberg) — HSBC Holdings Plc Chief Executive Officer Stuart Gulliver told U.K. lawmakers the scandal over the role the company’s Swiss private banking unit played in helping clients dodge taxes was the product of a different era.

“The practices that we’ve seen taking place at the Swiss private bank, which we absolutely do not support in any way, shape, or form, were in the period in the mid-2000’s,” Gulliver said in testimony before the Treasury Select Committee in London on Wednesday. “We are now de-risking the firm.”

Gulliver, 55, was called before lawmakers after the International Consortium of Investigative Journalists released details from client data stolen in 2008, showing how HSBC set up Swiss bank accounts for drug cartels, arms dealers and others, and advised its customers on how to evade tax.

“Screening was much more passive than it’s required to be today,” Chairman Douglas Flint told lawmakers at the hearing. “It’s also the case that rules have changed.”

Responsibility rests with the managers in Switzerland and the relationship managers who served these clients, said Flint, who was HSBC’s finance director at the time.

“We were all let down and the most culpable people are the relationship managers who did what they did,” Flint said.

When asked how those involved could be disciplined, Flint said about 30 percent of the relationship managers from 2006 are still with the bank, and they’ve all been closely reviewed.
‘Long Gone’

Former private-banking global CEOs Chris Meares and Clive Bannister also “bear fairly direct responsibility for what went on,” Flint said. Spokesmen for the two declined to comment. Meares retired from the bank in 2011, and Bannister in 2010.

As for recovering bonuses or other measures, “this is so long ago, clawbacks didn’t exist and remuneration for these individuals has long, long gone,” Flint said.

As for his own bonus, Flint said he hadn’t taken one since 2010.

“Three times in my career, I waived my bonus because I felt sufficient accountability; I don’t feel that” in relation to the events at the Swiss private bank, he said.

Gulliver said on Monday his variable compensation for 2014 was cut by 500,000 pounds ($774,900), while 1.25 million pounds was clawed back from his 2013 award after the bank was fined for currency rigging and other risk failures.

The ICIJ release on Feb. 8 came from data stolen by a former HSBC technology employee in 2008. He turned it over to the French government, which in turn shared it with other countries to use to fight tax fraud. It wasn’t until this month that the extent of the private banking unit’s role in helping clients evade taxes was made public.
‘Clearly Unacceptable’

“It was clearly unacceptable,” Gulliver said. “We very much regret this.”

The Swiss scandal is the latest in a series of conduct issues that cost the bank $3.7 billion last year in fines, customer redress and associated provisions. Settlements and provisions related to currency-market rigging probes were $1.2 billion, the bank said on Monday as it announced fourth-quarter results. HSBC set aside $1.3 billion in redress for improperly selling U.K. customers financial products.

“We are suffering from horrible reputational damage,” Flint said. “A bank lives on its reputation.”

HSBC dropped 0.7 percent to 577.4 pence in London. The shares have fallen about 7 percent since the ICIJ report.

More Skeletons?

The bank has been under enhanced scrutiny in the U.S. since 2012, when it reached a $1.9 billion deferred-prosecution deal to resolve claims it enabled Latin American drug cartels to launder money. As part of the settlement, the Justice Department installed an independent monitor for five years.

HSBC disclosed on Monday that the Justice Department is also investigating whether the prices of precious metals such as silver and gold were rigged. Ten banks have been targeted in that probe, and the agency is also still looking into HSBC’s role in currency-market manipulation.

“It’s possible that something will be uncovered somewhere else,” Flint said. “I sincerely hope there won’t be any more skeletons.”

For more on this story go to: http://www.bloomberg.com/news/articles/2015-02-25/hsbc-ceo-gulliver-says-swiss-tax-scandal-due-to-a-different-era

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