HSBC scandal erupts as UK banks face shake-up

HSBC scandal erupts as UK banks face shake-up

LONDON - Agence France-Presse
HSBC scandal erupts as UK banks face shake-up

A woman uses the automated teller machine at a branch of HSBC bank in Alhambra, Los Angeles. AFP photo

A scandal erupting at Europe’s biggest bank HSBC has added to concerns over the state of Britain’s financial sector amid the Barclays rate-rigging affair and as the industry faces a major shake-up.

HSBC last week apologized and its head of compliance David Bagley resigned after U.S. lawmakers accused the London-based bank of failing to apply anti-laundering rules, benefiting Iran, terrorists and drug dealers. The HSBC affair follows hot on the heels of the Libor interest rate rigging scandal that has brought down top executives at Britain’s Barclays bank -- most notably its chief executive Bob Diamond and chairman Marcus Agius.

Regulators are reportedly investigating HSBC, as well as Credit Agricole, Deutsche Bank and Societe Generale, over alleged manipulation of the Libor rate after Barclays was recently fined £290 million over the affair.

Britain’s financial regulator the Financial Services Authority (FSA) has said its Libor probe is looking at seven groups, which are not only British institutions. Bank of England governor Mervyn King has meanwhile proposed that central bank governors and regulators discuss Libor reform at their upcoming meeting in Basel, Switzerland, on September 9.

Barclays has admitted attempting to manipulate the Libor and Euribor rates between 2005 and 2009.
Libor (London Interbank Offered Rate) is a flagship London instrument used as an interest benchmark throughout the world, while Euribor is the eurozone equivalent. Investec analyst Ian Gordon believes that the Libor affair will have a far greater impact on the global banking landscape than the HSBC affair.
“Libor will, I think, be seen to be a sector-wide issue and with us for many years to come,” Gordon told AFP.

“The only good thing I can say about HSBC/money laundering etc is that it will be seen as a legacy issue, hence the fine -- when it comes -- will be a one-off rather than the prelude to civil litigation risk.”