Too big to regulate
There's nothing necessarily illegal about setting up a company in Panama into which you channel your bonus payments. There's similarly nothing inherently dubious about living in Hong Kong, having Hong Kong citizenship, and opening a Swiss bank account to store some of your wealth. But when you're the chief executive of a British bank embroiled in a scandal about helping customers dodge taxes by hiding money in its Swiss private-wealth unit, it sure looks bad.
HSBC Chief Executive Officer Stuart Gulliver oversees Europe's biggest bank by market value, a global banking behemoth that's celebrating its 150th birthday this year. There's not much cause for celebration in the bank's results published today, however, or in the various wrongdoings regulators around the world have found it guilty of. And the timing of the latest revelations about Gulliver's personal banking arrangements come at a tricky time; the bank's chairman Douglas Flint has been summoned by members of Parliament to testify to the Treasury Select Committee on Wednesday about his time as finance director.
Yesterday, the Guardian newspaper reported Gulliver's Panama connection via a company called Worcester Equities, and that in 2007 he had $7.6 million in a Swiss account he set up in 1998. HSBC responded by saying the arrangements were for "reasons of confidentiality" and "provided no tax or other advantage." And while the bank said the Swiss account had been declared to the U.K. tax authorities for "a number of years," it declined to be more specific. So there's no way of knowing whether the account was declared when it was opened, a couple of years ago, or some time in between. It also seems odd to go to the trouble (and presumably expense) of setting up a company in Panama for anything other than tax reasons, but I guess we have to take HSBC's word for the probity of the set up.
The disclosures come just weeks after the International Consortium of Investigative Journalists published details of how HSBC's Swiss arm regularly did business with tax evaders, drug dealers and arms traders. Belgian prosecutors have threatened to issue international arrest warrants for the bank's officers if they don't cooperate with a probe into tax dodging.
HSBC's spin is that the Swiss affair is ancient history, and that it's cleaned up its act since then. Here's how it described those events in today's earnings presentation:
The recent disclosures around unacceptable historical practices and behaviour within the Swiss private bank remind us of how much there still is to do and how far society's expectations have changed in terms of banks' responsibilities.