HSBC said today that it had agreed to pay $1.92bn (£1.2bn) as part of a settlement with US regulators. Although the settlement sets a new record for penalties on a bank, it should be viewed in the perspective of HSBC’s huge earnings power and the bank’s breaches of money laundering and sanctions laws. The bank was accused of lax controls which may have facilitated money transfers by terrorists and drugs traffickers. However, the fine has not materially affected HSBC’s viability – shares rose as investors’ expressed a measure of relief. Management had put aside $1.5bn in preparation for the settlement, but warned that the final bill could be significantly higher. In the first nine months of the year the bank said its underlying pre-tax earnings totalled $14.9bn – and that’s after putting aside $1.5bn for the US fine, and another $1.7bn for Payment Protection Insurance mis-selling in the UK.
Roger Francis is financials analyst at Mizuho International.
It is with glee that US regulators are levying fines against British banks, and both HSBC and Standard Chartered have been badly hit. There is a suspicious whiff of political opportunism. But there is also another game being played in New York: US regulators, encouraged by US vested interests, are determined to shift trading from Europe to the US. I have no sympathy for banks that break the law, and the UK can learn a lot from the robust approach of US regulators. However, regulatory enforcement must be even-handed. It would be completely inaccurate to suggest that these transgressions only occur within British banks. With the Libor scandal waiting to engulf others, it is time that we started challenging the US mindset that this is purely a British problem. It is not – it is a problem of international banking.
John Mann is Labour MP for Bassetlaw.