Page 27 - HSBC (D) Teaching Note

What Went Wrong

There can be little doubt, that HSBC is still associated with
fraud and money laundering. Overcoming this had been

one of the major tasks for Gulliver but he struggled to get

to grips with the string of scandals thrown up by a

number of ill-judged acquisitions dating back to before he

took over in 2011e.g. the Republic Safra tax evasion

scandal. Allied to these was the bank’s corporate

structure which lent itself to potential abuse.

Interest rates were a major problem for HSBC after the

financial crisis. Dropping to zero and remaining low for

years had a detrimental effect on HSBC as most of its

recent acquisition history was in the West which during

this period did not provide an adequate return. When

interest rates normalise the potential for HSBC to

generate additional profits will kick into operation as it
has a large excess of deposits over loans, especially with

its large deposit base in Hong Kong.

HSBC was caught money laundering but it did more than

just get caught it then consciously defied the U.S.

government to stop discriminating between illegitimate

and legitimate money. In addition, it convinced the

Government to allow it to maintain its banking license

thereby protecting its business when the DPA was

imposed.