HSBC executives may forfeit bonuses on laundering scandal
Bank has put aside $700m to cover costs of 'shameful and embarrassing' episode involving drug cartel cash
HSBC said yesterday that it may claw back bonuses previously paid to top executives after the bank set aside $700m (€570m) to cover the costs of a US money-laundering scandal described by the bank itself as "shameful and embarrassing".
The case hit headlines here because two former HSBC executives named in the US report are now senior financial figures in Ireland.
The US report said there was a "pervasively polluted" culture at HSBC between 2004 and 2010, but does not list specific findings against any of the individuals named in the course of the investigation.
Former HSBC chief executive Michael Geoghegan is now the top adviser on NAMA to finance minister Michael Noonan, where he gives his advice to the minister at no charge.
He was the most senior executive at HSBC during much of the period investigated by US authorities.
The current chairman of state-owned AIB, David Hodgkinson, was also a senior executive in HSBC during the period.
Finance Minister Michael Noonan, who controls both NAMA and AIB, has given his backing to both Mr Geoghegan and Mr Hodgkinson since the US report was published.
It all comes after the world's second-biggest bank was blasted by authorities in the US earlier this month over lax financial controls. In an explosive 330-page report, a US Senate committee said HSBC allowed billions of dollars in questionable transactions that moved cash between the US and countries with strong links to terrorism and the drugs trade, including Iran and Mexico.
Yesterday, HSBC boss Stuart Gulliver, who took the top job in 2010, said the findings in the US report were "shameful and embarrassing" for the bank.
He said a $700m provision is the bank's "best estimate" of the cost of the scandal, but admitted the number could be "significantly larger".
Mr Gulliver said HSBC may seek to claw back bonuses paid out during the period that was later investigated.
However, he declined to say which bankers are likely to be targeted for the claw backs.
In all, HSBC has set aside $2bn to cope with former mistakes.
As well as possible US fines, $1bn has been set aside to compensate UK customers for mis-selling them loan insurance, and $237m is to cover payouts to UK businesses wrongly sold complex interest rate hedging products.
"What happened in Mexico and the US is shameful, it's embarrassing, it's very painful for all of us in the firm," he said on a conference call.
"The firm clearly lost its way in this regard and it's right that we apologise.
"Colleagues internally have been aware that this is the backdrop of why we had to change the firm."
Mr Gulliver said yesterday that he was aware of the investigation into its US compliance problems in 2010 before he took over.
He said HSBC has doubled spending on "compliance" to more than $400m since he had taken on the top job at the bank.
Neither Mr Geoghegan nor Mr Hodgkinson could be reached for comment yesterday.
(Additional reporting Reuters)