“It has been a ghastly week for British banks,” said Alex Brummer in the Daily Mail. Three people were arrested in London amid the probe into the Libor-rigging scandal. Standard Chartered was fined $667m as it settled allegations that it had helped customers violate US sanctions against Iran.
HSBC also reached a deal with American authorities, handing over $1.9bn for breaking money-laundering rules. The bank allegedly failed to prevent money laundering by drug cartels and terrorists. A Senate panel reported that HSBC had been unable properly to monitor $15bn in bulk cash transactions between 2006 and 2009.
What the commentators said
Every big British bank “is struggling to keep control of the costs of fines and compensation relating to a great variety of forms of sloppy practices and misbehaviour in the boom years”, said Robert Peston on BBC.co.uk. Royal Bank of Scotland’s fines from regulators all over the world for its role in rigging Libor will grab headlines soon.
Fines for misselling payment protection insurance have already rocketed to over £7bn. There could also be another £1bn to pay out to compensate small businesses sold unsuitable interest-rate swaps. And let’s not forget possible civil cases from disgruntled investors.
In HSBC’s case, the fine may be huge, said James Moore in The independent, but it still amounts to less than half the bank’s underlying third-quarter profits. “It’s the language used by the American watchdogs which has really stung.” Talk of “drug kingpins” and “rogue nations” seems likely to ensure that people never look at “this grandest of banks in quite the same way again”.
Perhaps the most worrying aspect of this HSBC affair, said Dominic Elliott on Breakingviews, is that the bank is apparently “too big to indict”. American regulators were tempted to indict it for money laundering, which would have closed down the bank’s American business. They also considered a lesser indictment would have forced it at least to curtail its American operations.
But apparently regulators desisted because they were worried that clamping down hard on HSBC could have destabilised the wider banking system. In other words, it is still so systemically important that regulators refrained from shaking it up. So the huge fine is another sign that, four years after Lehman, “finance is far from fixed”.