Any other business

Lord Green must answer for HSBC’s sins – but maybe it was always too big to manage

Plus: The mysteries of deflation, and a £55 million pound shop deal

14 February 2015

9:00 AM

14 February 2015

9:00 AM

Stephen Green — the former trade minister Lord Green of Hurstpier-point, who became this week’s political punchbag— was always a rather Olympian, out-of-the-ordinary figure at HSBC.

This was a bank that traditionally drew its top men from a corps of tough, non-intellectual, front-line overseas bankers typified by the chairmen before Green, Sir John Bond and Sir Willie Purves. As the dominant bank in Hong Kong and a market leader throughout Asia and the Middle East, it was habituated to dealing with customers who took big risks, hoarded cash when they had it, and did not necessarily regard paying tax as a civic duty. But if ethics were rarely discussed in HSBC dining rooms, they were robustly applied — by weeding out bad borrowers and unreliable managers, who moved on to make trouble for lesser banks seeking to compete on HSBC’s patch. That strength of grip enabled HSBC to become the world’s ‘local bank’ (a slogan it dropped in 2011) and second-largest financial colossus.

As for Green, he was a former civil servant and McKinsey consultant who arrived in his mid-thirties at HSBC headquarters in Hong Kong to do corporate planning. We might guess that he did not have many face-to-face dealings with archetypal local customers — property developers, dealers in gold and diamonds, men who made two-way prices in everything from fake handbags to taxi licences — or spend much time drinking whisky with them in Wan Chai nightclubs. But he had brains, gravitas and the high moral tone of a committed Christian who would eventually take holy orders in his spare time. The geopolitics of China’s emergence as a great economic power could have been his Mastermind special subject — and was indeed a prime reason why David Cameron later chose him as trade minister.

INDONESIA-WTO-DIPLOMACY-TRADE-COMMERCE-ECONOMY
Stephen Green Photo: Getty

He rose to take charge of HSBC’s investment and corporate banking activities, but they were never allowed to distort the balance sheet as they did at Barclays and RBS. Blame for the one strategic gambit that would come back to haunt HSBC during the financial crisis — the 2003 acquisition of the US subprime lender Household International — was never laid on Green, but on his predecessor Bond. Under Green’s hand, HSBC was the only British-based banking group with sufficient capital strength and market confidence to weather the crisis without a whisper of need for a bailout.

Up to no good


But for all its core strengths, outlying parts of HSBC were up to no good. In 2012, a US Senate subcommittee found that HSBC affiliates in Mexico and elsewhere had ‘exposed the US financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks’. Besides channelling cash for drug cartels and suspicious Russians, HSBC was accused of circumventing sanctions on Iran and North Korea and servicing Saudi banks with jihadi links: a $1.9 billion fine followed.

And even before that scandal broke, a hacked list of more than 100,000 customers of HSBC’s wealth management office in Geneva had fallen into the hands of French minister of finance Christine Lagarde, who now runs the IMF. The sums of money held were enormous, and the vast majority of non-Swiss customers were assumed to be avoiding taxes in their home domiciles. Two thousand Greek names were much bandied about as evidence of the incorrigibility of Greece — and justification for tougher bailout terms. But now it turns out that our own HMRC identified 1,100 British tax-dodging account-holders on the ‘Lagarde list’, and has so far recouped £135 million but managed to prosecute only one of them.

Cue an Albert Hall-sized chorus of indignation, led by Labour shadow ministers (ably assisted by BBC news editors) desperate to regain ground after Ed Miliband’s disastrous spat with business leaders — and despite the fact that the Geneva list dates from a period when Ed Balls was the Treasury minister watching over the banking sector. Cue also big buckets of ordure on the head of Lord Green, who has retired to the congenial post of chairman of the Natural History Museum but will no doubt now be summonsed to one of those ghastly select-committee show trials.

Let’s not mince words: Green earned a fortune at the top of HSBC, followed by a peerage, and he must answer for the failings of culture and control that have been revealed. He may have been too cerebral for such a vast command in the first place. But if there’s a note of sympathy in this account of his career, it is because I think he’s one more victim of a problem I identified long ago, in one of the first pieces I ever wrote for The Spectator, namely the perils of sheer bigness in banks that operate on a global scale.

Diversity and complexity of market risks combined with ‘fatal lack of comprehension between colleagues’, I wrote, are a formula for perpetual trouble. ‘It’s a safe piece of advice for a new chairman of a large international bank that at any given moment somebody, somewhere in your group, will be doing something utterly disastrous.’ So it was for Stephen Green, whose previously stainless reputation is unlikely to recover.

Confused

Meanwhile in other news, Governor Mark Carney was expected to slash his inflation forecast ‘close to zero’ this week, and may well find himself publishing the Bank of England’s first ‘deflation report’ later this year. The prospect of falling prices is so unfamiliar in modern times that we are not at all sure how to react. It’s clearly bad as it afflicts the stagnant eurozone, because demand for British exports will wither even further as orders and capital investments are deferred; but at home it’s clearly good for real wage growth, which has at last moved into positive territory but is still the missing element of a broader economic recovery.

And what are we to make of Poundland’s £55 million takeover of its rival 99p Stores? Does that signal the next uptick on the inflationary horizon?

Got something to add? Join the discussion and comment below.

You might disagree with half of it, but you’ll enjoy reading all of it. Try your first 10 weeks for just $10


Show comments
  • edwardowen

    Come on ed make all these scum pay up when you get to power.

  • TomHark

    Are you saying that he was unaware of the existence of over 100,000 questionable accounts? Must have been pretty busy doing other things.

    • TomHark

      OK maybe not ‘questionable’ but at least ‘of interest’.

    • wycombewanderer

      Why were they questionable?

      • TomHark

        I did amend that to ‘interesting’.

  • Bill Chapman

    I can only see a decrease in this sleaze and in these dodgy detailings when Labour comes to power in May.

    • wycombewanderer

      Labour created the environment whereby these banks greww not only too big to fail but too big to monitor even with a decent regulatory system which Brown and Balls removed.

      • ItsAlreadyTooLate

        And the Conservative Opposition said what?, George Osborne, had been a keen advocate of further banking deregulation when the Conservatives were in opposition.

  • Blindsideflanker

    If the argument is that HSBC is too large to manage with 250,000 employees, what does it make the NHS with 1.7 million employees?

  • Guest

    A few years ago, I opened an account with HSBC in order to have an inheritance transferred from another country by SWIFT. The amount deposited to my account was over $2000.00 short of the figure that left the country of transfer. My questions were met with blank stares, and HSBC refused to provide me with any paperwork

  • godot

    A few years ago I opened an account with HSBC and arranged to have a small inheritance transferred from another country by SWIFT. The amount deposited to my account was more than $2000.00 less than the amount that left the country of origin. My requests for an explanation were fobbed off, and HSBC refused to provide me with any paperwork. I transferred all the money out of HSBC, and closed my account with them.

  • shohanali ali

    Gamers Heaven

    We at Gamers Heaven love gaming and so we dedicate our work
    in making your playing experience as enjoyable as it can be. Our aim for all
    our products is one thing, helping you have the best gaming experience
    possible

    Buy Chair: http://gamersheaven.co.uk/

  • “Capitalism and the financial system which underpins it remain “in the dock” in the wake of the banking crisis, yet there remain no credible alternatives to them, the former head of HSBC has said.”

    Capitalism and the financial system is already judged and tested with the Divine fire in 
Deuteronomy 9.20,21
    The Golden Calf

    20 “The LORD was angry enough with Aaron to destroy him; so I also prayed for Aaron at the same time. 
21 “I took your sinful thing, the calf which you had made, and burned it with fire and crushed it, grinding it very small until it was as fine as dust; and I threw its dust into the brook that came down from the mountain.

    As said above ‘Capitalism and the financial system is already judged and tested’ NOW is the time for execution.
    The Book of Revelation 11.17 and 18(a,b,f)
    The Seventh Trumpet

    …17 “saying, “We give You thanks, O Lord God, the Almighty, who are and who were, because You have taken Your great power and have begun to reign.
18 And the nations were enraged, and Your wrath came,… to destroy those who destroy the earth.”

    AMEN.

Close