HSBC bosses rejected calls from British lawmakers for them to quit over the bank’s Swiss tax scandal, but said they were having to clean up after a “terrible list” of control and compliance failings.
HSBC Chairman Douglas Flint and Chief Executive Stuart Gulliver told a panel of UK lawmakers they shared collective responsibility for failings at HSBC’s Swiss bank that allowed clients to dodge taxes.
“It clearly was unacceptable, we very much regret this and it has damaged HSBC’s reputation,” Gulliver told the Treasury Committee with regard to practices in its Swiss bank in the mid-2000s.
“I am responsible for clearing it up. I have made substantial changes,” he said.
Europe’s biggest bank has admitted failings in compliance and controls in its Swiss private bank after media reports said it helped wealthy customers conceal millions of dollars of assets in a period up to 2007.
It adds to a long list of banking scandals that have emerged since the financial crisis, including several at HSBC. The bank was fined $1.9 billion two years ago by U.S. authorities for lax controls that allowed criminals to launder money and was also hit with a $611 million penalty by regulators in November for alleged manipulation of currency markets.
“It’s a terrible list,” Flint said when a UK member of parliament read out the recent fines and investigations.
He said the bank was more than halfway through a transformation to make it simpler and create more central control. “I sincerely hope there are no more skeletons,” Flint added.
Flint said the allegations of wrongdoing had had a devastating impact on the bank’s reputation that would take time to rebuild.
This has also caused a political storm in Britain ahead of an election in May. The opposition Labour Party has criticized Prime Minister David Cameron for appointing former HSBC Chairman Stephen Green as a trade minister after he left the bank.
Green was responsible along with the rest of the management team for the control environment at the time, but Flint said the people most responsible for the Swiss bank failings were local management.
Gulliver’s own tax affairs have been thrust into the center of the scandal after Britain’s Guardian newspaper said he had sheltered millions of pounds in HSBC’s Swiss private bank via a Panamanian company.
“Do you have the moral authority to carry on this change process at HSBC?” one of the lawmakers asked him during an often hostile grilling lasting almost two hours.
Gulliver denied any wrongdoing and said being domiciled in Hong Kong did not represent aggressive tax avoidance. He said he had paid all his UK taxes and opened his Swiss account via a Panama company so colleagues could not see his finances.
Gulliver has said the failings in Switzerland were in the past and that the business there had since been transformed.
He was appointed CEO of HSBC in 2011 and has sold or closed 77 businesses and axed more than 50,000 jobs at the bank as part of a restructuring of the group.
HSBC’s Swiss bank is under investigation by a number of countries, including France and Belgium, and tax authorities in Argentina, Switzerland and India are also investigating the allegations of tax evasion.
Britain’s financial watchdog is looking at standards at the Swiss bank, but no UK authority has announced any criminal probe.
HMRC, Britain’s tax authority, has faced criticism for not being tough enough on tax avoiders or the bank itself. One UK individual has been prosecuted and HMRC has reclaimed 135 million pounds ($209.34 million) from names on the HSBC list, including 15 million pounds in penalties.
Lin Homer, chief executive of HMRC, said the data provided on the HSBC Swiss bank clients was of poor quality and authorities had pursued everybody they believes owed tax from the Swiss data received. “We broadly think we have got it all,” she told the panel of lawmakers.