UK banks no longer 'too big to fail': BoE

rfi –AFP, 10 June 2022 

Following the financial global crisis more than a decade ago, the UK taxpayer
pumped £137 billion ($171 billion) into the country's banks Tolga Akmen AFP/File

London (AFP) – Britain's biggest banks are no longer "too big to fail" in any future financial shocks, with shareholders rather than taxpayers ready to bear the cost, the Bank of England said Friday. 

Following a major review of eight lenders -- including Barclays, HSBC, Lloyds and NatWest -- the BoE concluded "that if a major UK bank failed today it could do so safely: remaining open and continuing to provide vital banking services to the economy. 

"Shareholders and investors, not taxpayers, will be first in line to bear the costs, overcoming the 'too big to fail' problem," the central bank added. 

Following the financial global crisis more than a decade ago, the UK taxpayer pumped £137 billion ($171 billion) into the country's banks, while also being able to benefit from significant BoE support. 

The government also took control of Royal Bank of Scotland -- rebranded as NatWest ahead of its recent return to the private sector. 

Despite the bailouts, "the disruption to the financial system contributed to the UK and global recession that followed. We cannot forget these lessons", the BoE added Friday. 

The central bank was publishing its first assessment of the eight major UK banks' preparations for resolution under the Resolvability Assessment Framework. 

RAF "is a core part of the UK's response to the global financial crisis, and demonstrates how the UK has overcome the problem of 'too big to fail'", said Dave Ramsden, deputy governor for markets and banking at the BoE. 

"The UK authorities have developed a resolution regime that successfully reduces risks to depositors and the financial system and better protects the UK's public funds." 

The other four banks assessed were Nationwide, Santander UK, Standard Chartered and Virgin Money UK.

HSBC to pay $765m US fine over crisis-era conduct

Yahoo – AFP, Roland JACKSON with Elaine YU in Hong Kong, 6 August 2018

HSBC said it is hiring 'more frontline staff' in its strongest businesses after an
overhaul that saw 50,000 jobs axed

Britain's Asia-focused bank HSBC on Monday revealed a $765-million US fine over the lender's actions in the run-up to the subprime crisis, as it also logged rising first-half profits.

HSBC said it has agreed to pay the large US penalty over its conduct in residential mortgage-backed securities (RMBS), a type of investment derivative that bundled home loans into securities and was sold to investors before the 2008 financial meltdown.

"HSBC reached a settlement-in-principle to resolve the Department of Justice's civil claims relating to its investigation of HSBC's legacy RMBS origination and securitisation activities from 2005 to 2007," the lender announced in a results statement.

"Under the terms of the settlement, HSBC will pay the DoJ a civil money penalty of $765 million."

The London-headquartered giant is the latest global bank to reach a US settlement over conduct in the run-up to the notorious subprime crisis which sparked a worldwide recession.

However, the deal was agreed in July and therefore was not included in HSBC's first half results, which cover the six months to June.

Brexit, trade war headwinds

HSBC posted advancing first-half profits and expressed optimism over the outlook -- despite headwinds from rising costs, the China-US trade war and Brexit.

Pre-tax profit rose almost five percent to $10.7 billion in the six months to the end of June compared with a year earlier.

Net profit or earnings after taxation gained 2.5 percent to $7.173 billion, boosted by high-growth markets -- particularly in Asia and the Middle East.

"We haven't yet seen any impact on our business or through our customers," chief executive John Flint told reporters when asked about the impact of the China-US trade spat.

"It's still too early to tell and in terms of estimating potential impact it's difficult because we don’t quite know what the substance of the trade war will be.

"We've got some tariffs in place and some coming, but the full impact is very difficult to estimate.

"It is possible that it will shave China's GDP growth by a modest amount but (it is) too early too start predicting."

Turning to Britain's looming departure from the European Union next year, the bank chief stressed that its cost estimate for a so-called hard Brexit remained unchanged.

The lender had warned late last year that a chaotic Brexit could cost it up to $300 million.

It had also outlined tentative plans to switch 1,000 jobs to Paris from London owing to Britain's departure from the European Union due in 2019.

"Our role has been to ensure that we are in a position to secure customers' ... needs across the UK, Europe and the network that we serve in 67 markets across the world," added Flint on Monday.

"Our planning from the outset has been based on what is euphemistically called a hard Brexit, and therefore the cost guidance that we have given in that regard remains absolutely consistent with what we have talked about in the past."

Costs outpace revenues

Revenues were up four percent at $27.3 billion in the reporting period -- but operating expenses grew seven percent to $17.5 billion.

In late morning deals, HSBC shares fell 0.53 percent to 712 pence on London's rising FTSE 100 index.

"The market has reacted cautiously to the numbers ... because the group reported costs rising significantly faster than income," noted Hargreaves Lansdown analyst Steve Clayton.

After wide-ranging cutbacks that saw 50,000 jobs axed in an overhaul announced in 2015, the bank added on Monday that it was now hiring again as it seeks new growth areas.

Flint said in June that he plans to invest $15-17 billion primarily in growth and technology projects, with a particular focus on accelerating growth in Asia.

HSBC, founded in Hong Kong and Shanghai in 1865, sees its focus firmly in Asia, although it has been based in Britain since 1992.

German taxman goes after foreign banks

German state prosecutors are investigating nearly 60 foreign banks for "abetting tax evasion," a newspaper report has said. Self-declaring former tax-evaders are proving a particularly valuable source of information.

Deutsche Welle, 4 Oct 2016

Prosecutors in Germany's most populous state are investigating 57 foreign banks on charges of abetting tax evasion, according to the "Süddeutsche Zeitung." The banks, from Switzerland, Liechtenstein, Austria and Luxembourg, have all been under suspicion over the past two years, the report said on Tuesday.

The banks were brought to the investigators' attention thanks to a wave of German citizens offering voluntary declarations of their foreign bank accounts over the past six years - concentrating in particular on banks mentioned repeatedly.

The German authorities have already negotiated fines with banks in around 10 cases, according to the paper, amounting to a total of around 120 million euros ($135 million). The biggest single fine came from the Basler Kantonalbank, Switzerland, which handed over 37.1 million euros.

The Luxembourg bank BCEE has paid 14 million euros, while the Deutsche Bank in Switzerland has paid some 10 million euros. On top of that, in one particularly egregious case, a bank is believed to be negotiating a fine of around 60 million euros.

Walter-Borjans said prosecutors will
pursue every indication of tax evasion

The Austria-based Akte Walser Privatbank confirmed that it had paid its fine of 5.4 million euros, and that its policies had become tighter since the case. "Our bank changed the way it deals with foreign customers radically in 2009," a spokesman told the paper. "The requirements for the identification of customers and the transparency about the origin of the means are very strict."

BCEE did not respond to a request for comment, while a spokesman for Deutsche Bank in Switzerland told DW that it never comments on such cases.

New methods

Paying closer attention to voluntary declarations has become German prosecutors' new favorite method of tracking down tax evaders.

Instead of buying up CDs of customer data from disloyal bank employees (or other illicit sources) - a move that divided Germany's political parties when authorities spent several million euros to do so in the past - the authorities now increasingly investigate banks that repeatedly appear on voluntary declarations.

The former tax evaders are then questioned for more information about the banks. In an email to DW, however, a spokesman for the Cologne state prosecutors said they could "neither comment on or confirm" the "Süddeutsche Zeitung" report and that they did not record statistics about voluntary declarations.

Tenacious taxmen

North Rhine-Westphalia has become Germany's most vociferous tax crime prosecutor in recent years.

The NRW authorities have acquired 

CDs with account data in the past

The state has acquired 11 data storage devices since 2010, which according to a statement from early August, created a wave of voluntary declarations and fines that has brought some 6 billion euros to Germany's public coffers.

The most recent example was in August, when someone anonymously (and free of charge) sent the NRW Finance Ministry an external hard drive containing the details of some 160,000 bank accounts - 54,000 of which were German, around 50,000 Belgian, and around 42,000 French. State Finance Minister Norbert Walter-Borjans has pledged to pass on all the data the state has to the relevant foreign authorities across Europe.

The latest revelations show that German prosecutors are now paying particular attention to banks in Austria, where banking secrecy was once protected by the constitution. In 2014, the European Court of Justice ruled that this was unlawful, triggering a sharp rise in voluntary tax declarations, particularly in Bavaria - while many Austrian banks let employees go.

Last week, various German media outlets reported that the NRW tax authorities were also pursuing major multinational financial institutions, including J.P. Morgan, Barclays and HSBC, on suspicion of "devious stock trading," allowing them to avoid some 10 billion euros of tax over several years.

"Our tax investigations go after every suspicion - without regard for either individuals or credit institutions," Walter-Borjans said. He added that a number of banks had already entered into negotiations and were cooperating with authorities, though he would not go into details. He went on to urge other banks to follow suit.

Related Article:

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Big three Dutch banks have announced 40,000 job cuts since 2011

"The Recalibration of Awareness – Apr 20/21, 2012 (Kryon channeled by Lee Carroll) (Subjects: Old Energy, Recalibration Lectures, God / Creator, Religions/Spiritual systems (Catholic Church, Priests/Nun’s, Worship, John Paul Pope, Women in the Church otherwise church will go, Current Pope won’t do it), Middle East, Jews, Governments will change (Internet, Media, Democracies, Dictators, North Korea, Nations voted at once), Integrity (Businesses, Tobacco Companies, Bankers/ Financial Institutes, Pharmaceutical company to collapse), Illuminati (Started in Greece, with Shipping, Financial markets, Stock markets, Pharmaceutical money (fund to build Africa, to develop)), Shift of Human Consciousness, (Old) Souls, Women, Masters to/already come back, Global Unity.... etc.) - (Text version)

“… The Shift in Human Nature

You're starting to see integrity change. Awareness recalibrates integrity, and the Human Being who would sit there and take advantage of another Human Being in an old energy would never do it in a new energy. The reason? It will become intuitive, so this is a shift in Human Nature as well, for in the past you have assumed that people take advantage of people first and integrity comes later. That's just ordinary Human nature.

In the past, Human nature expressed within governments worked like this: If you were stronger than the other one, you simply conquered them. If you were strong, it was an invitation to conquer. If you were weak, it was an invitation to be conquered. No one even thought about it. It was the way of things. The bigger you could have your armies, the better they would do when you sent them out to conquer. That's not how you think today. Did you notice?

Any country that thinks this way today will not survive, for humanity has discovered that the world goes far better by putting things together instead of tearing them apart. The new energy puts the weak and strong together in ways that make sense and that have integrity. Take a look at what happened to some of the businesses in this great land (USA). Up to 30 years ago, when you started realizing some of them didn't have integrity, you eliminated them. What happened to the tobacco companies when you realized they were knowingly addicting your children? Today, they still sell their products to less-aware countries, but that will also change.

What did you do a few years ago when you realized that your bankers were actually selling you homes that they knew you couldn't pay for later? They were walking away, smiling greedily, not thinking about the heartbreak that was to follow when a life's dream would be lost. Dear American, you are in a recession. However, this is like when you prune a tree and cut back the branches. When the tree grows back, you've got control and the branches will grow bigger and stronger than they were before, without the greed factor. Then, if you don't like the way it grows back, you'll prune it again! I tell you this because awareness is now in control of big money. It's right before your eyes, what you're doing. But fear often rules. …”

Swiss authorities probe 7 banks for suspected metals price fixing

Yahoo – AFP, Nina Larson, 28 Sep 2015

Swiss competition authorities are investigating UBS, HSBC, Deutsche Bank 

and four other banks on suspicion of price fixing in the precious metals market

(AFP Photo/Fabrice Coffrini)

Geneva (AFP) - Swiss competition authorities said Monday they were investigating UBS, HSBC, Deutsche Bank and four other major banks for suspected price fixing in the trade of precious metals like gold and silver.

The Swiss Competition Commission (COMCO) said it was looking into whether seven banks had colluded to manipulate prices in the precious metals market.

The watchdog said in a statement that it had "opened an investigation against two Swiss banks, UBS and Julius Baer, as well as against the foreign financial institutions Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui."

The Swiss Competition Commission says

it is investigating two Swiss banks, UBS 

and Julius Baer, as well as against the

 foreign financial institutions Deutsche

Bank,HSBC, Barclays, Morgan Stanley

and Mitsui (AFP Photo/Fabrice Coffrini)

COMCO, which opened a preliminary probe in February, said it now had indications that the banks had "possibly concluded illegal competition defying deals" in the trade of the precious metals gold, silver, platinum and palladium.

"We think they can have manipulated the price of these precious metals," COMCO deputy chief Patric Ducrey told AFP.

The competition authority said it especially suspected the banks had fixed the prices of bid/ask spreads within the market.

Ducrey said the banks had all been informed of the ongoing probe, and that the investigation would likely conclude in 2017.

Impact unclear

Credit Suisse analyst Cristine Schmid told AFP it was too early to say how the COMCO probe would impact the targeted banks, beyond pushing up their legal costs.

HSBC is one of several banks being 

investigated by Swiss authorities for

price fixing (AFP Photo/Philippe Huguen)

"We would need to know first of all in case the allegations are true for how long this has lasted, what were the volumes affected and what is the average kind of spreads versus market spreads," she said, pointing out that the longer the alleged price agreements would have lasted, "the worse for the banks."

This was not the first time the role of banks in determining the price of precious metals has been questioned.

In August, the European Commission said it was investigating "anti-competitive behaviour in precious metals spot trading."

And in February, US financial media reported that the Justice Department had opened its own investigation into suspected manipulation of precious metals markets by 10 major international banks: HSBC, Bank of Nova Scotia, Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Societe Generale, Standard Bank and UBS.

Goldman Sachs, HSBC, Standard Bank of South Africa and the German chemical group BASF have also been under a US investigation since last November over a complaint alleging rigging of the prices of platinum and palladium.

There are moves underway to reform the 

century-old method of gold price "fixing,"

 since the current global benchmark,

 London's Gold Fix, has already been 

tainted by a rigging scandal (AFP

Photo/Sebastian Derungs)

Julius Baer, which was not part of the US investigation, told AFP Monday it would "constructively cooperate" with the COMCO investigation.

UBS, which did not immediately return requests for comment Monday, said in May it had won immunity from criminal fraud charges in the US probe, after agreeing to provide the Justice Department with information about precious metal transactions.

Reform under way

Precious metals have increasingly come under scrutiny after the discovery that other financial benchmarks have been rigged.

Some of the banks under investigation Monday were already hit by massive fines earlier this year after pleading guilty to US charges of conspiring to rig Libor rates, the global commercial interest rate benchmark used to peg millions of rate-sensitive contracts and loans around the world.

Traders operate in the pit at the London 

Metal Exchange in central London, 21 

September 2007 (AFP Photo/Shaun Curry)

That rate is estimated to underpin some $500 trillion worth of contracts.

The price-setting mechanism to determine benchmark prices for precious metals has also been under reform, amid calls for greater transparency.

Panels of banks have until recently agreed on the reference prices for the precious metals.

But last year, the exchange CME Group and financial information giant Thomson Reuters began providing an electronic system for setting benchmark silver prices, and the London Metal Exchange (LME) did the same for platinum and palladium.

There are also moves under way to reform the century-old method of gold price "fixing," since the current global benchmark, London's Gold Fix, has already been tainted by a rigging scandal and attacked by critics as old-fashioned.

A new method for setting the gold benchmark price is expected to take effect in March.

HSBC unveils radical overhaul to axe up to 50,000 jobs

Yahoo – AFP, Roland Jackson, Roland Jackson with Laura Mannering in Hong Kong, 9 June 2015

HSBC says about 25,000 jobs will be lost with the sale of operations in Turkey

and Brazil (AFP Photo/Ozan Kose)

HSBC will cut its global workforce by up to 50,000 as it exits Brazil and Turkey and mulls relocating headquarters back to Asia from London, the banking giant said Tuesday.

Europe's biggest bank aims to save up to $5.0 billion (4.4 billion euros) in annual costs within two and a half years as it seeks to boost profits and move past recent scandals that have scarred the British lender, including the rigging of foreign exchange markets.

HSBC said it wants to focus more on Asia, particularly in the Pearl River Delta region in southern China, amid an ongoing review of its London headquarters that will be completed this year.

Financial analysts predict that HSBC

 may relocate its headquarters from 

London to Hong Kong, owing to its low

tax regime (AFP Photo/Ben Stansall)

"We have reshaped HSBC, but it is clear it is insufficent," said chief executive Stuart Gulliver, who has implemented swinging cutbacks since becoming the bank's head in 2011.

With regard to the group's possible new base, Gulliver said "there is an opportunity to create another Hong Kong" in Guangdong.

"The world is increasingly connected, with Asia expected to show high growth and become the centre of global trade over the next decade," he added.

Philip Benton, an analyst at research group Euromonitor, said the bank was "redeploying their resources to where the most profit and the most revenue they can generate for the bank".

"HSBC is known as an Asian bank, that is what its heritage is. And I think the problem they faced in entering markets like Brazil and Turkey... it took them a while to be established and they were also up against strong competition from the local banks," he told AFP.

Headcount slashed

HSBC said there would be a 10-percent reduction in jobs with the shedding of between 22,000 and 25,000 positions worldwide.

A further 25,000 jobs would be lost with the sale of operations in Turkey and Brazil. However some or all of these staff could be kept on by potential buyers.

The group will meanwhile seek to axe its risk-weighted assets (RWA) by a hefty $290 billion, and also outlined plans to rebrand its British retail banking division.

The announcements sent HSBC's share prices dropping 0.97 percent to 613.50 pence in late deals on London's benchmark FTSE 100 index, which was down half a percent.

HSBC said the latest job losses would include between 7,000 and 8,000 positions in Britain -- where its retail bank is being relocated from London to Birmingham, central England, by 2019.

It also aims to trim its worldwide network of branches by 12 percent, with Britain being one of seven major regions to be impacted.

HSBC has been hit by Britain's banking levy on the financial sector -- which last year cost it $1.1 billion -- as well as new industry rules to "ring fence" British banks' retail operations to protect them from riskier investment divisions.

The bank aims to save $4.5-$5.0 billion in annual costs by late 2017.

However, the initial overall cost of the restructuring is estimated at $4.0-4.5 billion.

Swiss prosecutors have closed an investigation into claims HSBC's Geneva

branch helped clients evade millions of dollars in taxes (AFP Photo/Fabrice Coffrini)

'Strategic reset'

Investec bank analyst Ian Gordon described the news as "a positive announcement".

"Today’s strategic reset is focused on the delivery of cost and RWA efficiencies, and exiting unattractive markets," he said.

Nicolas Ziegelasch, head of equity research at broker Killik & Co, agreed.

"The announced restructuring is positive as the market had begun to question whether its sheer size and scale allowed it to generate strong returns," he said.

"The refocusing on the business on its Asian operations is in line with where future global growth will come from."

Founded in Hong Kong and Shanghai in 1865, HSBC has been based in Britain since 1992 when it took over Midland Bank and shifted its headquarters to London.

HSBC said it would change its brand name in Britain, with analysts saying it could turn current branches back into the Midland.

Related Article:

Deutsche Bank co-CEOs resign

Foreign taxpayers named by Switzerland

Switzerland has begun online publication of names of foreigners and foreign firms wanted in tax probes by their countries of origin, including Germany. American citizens are identified only by their initials.

Deutsche Welle, 25 May 2015

The Swiss Sunday newspaper "Sonntagszeitung" said the alpine nation was flooded with formal tracing requests from foreign tax authorities. In response, Switzerland had resorted to listing names, birthdates and nationalities in its federal gazette, where official texts are published.

The official justification was that the publication gave those identified the chance to hire a lawyer and seek legal recourse, said the "Sonntagszeitung", referring to recent roll-backs of Swiss bank secrecy, especially under US pressure.

Formal requests from abroad

The newspaper quoted Swiss federal tax authority official Alexandre Dumas as saying that banks had little interest in seeking customers who no longer kept their accounts in Switzerland.

Instead, foreign countries were sending formal judicial assistance requests, asking for help to trace their missing taxpayers via Switzerland's federal tax administration in Berne.

In turn, Switzerland was demanding that such countries, when sent Swiss documentation on such suspects, keep their further details confidential.

Further 'taboo break'

It amounted, however, to a further "taboo break" by Swiss authorities, "Sonntagszeitung" said, while also quoting a Swiss lawyer, Andreas Rüd, who said many suspects did not realize that they could seek Swiss legal recourse.

The Swiss federal gazette's weekly editions in May contained several dozen decrees, naming citizens of Spain, India, the Netherlands, Germany, Britain, the USA and South Korea and companies registered in Panama, the Bahamas and Spain.

In the case of India and Germany, Dumas denied that their formal requests stemmed from tax authorities recent acquisitions of stolen data listing suspected tax evaders.

"We are never certain, whether it [the request] involves stolen data. But, the principle of trust applies," Dumas said.

Probes prompt disclosures

Last year in Germany, suspected tax evaders filed a record 40,000 self-disclosure notices on funds they had secreted abroad, prompted by a new law that allows backdated payment of overdue tax coupled with penalties.

In February, the International Consortium of Investigative Journalists (ICIJ) made public data files leaked to French authorities in the so-called SwissLeaks case. The London-based HSBC bank was accused of helping suspects in some 200 countries.

HSBC apologized and its Swiss branch said it had been "cooperately continuously" with Swiss authorities since it became aware of the data theft in 2008.

That followed agreements by Swiss giants UBS and Credit Suisse to pay fines in the US on allegations of helping Americans to evade taxes.

In March, Switzerland signed an accord to automatically share tax information with Australia. Similar accords are planned with the US and EU.

ipj/ng (dpa, Reuters, AFP)

Britain’s Scandal-Battered Banks Paralyzed as Election Looms

Jakarta Globe, Stephen Morris,May 01, 2015

This picture shows a general view of a branch of the Royal Bank of Scotland (RBS)
 alongside a branch of Clydesdale Bank in Edinburgh, on September 11, 2014.
(AFP Photo/Andy Buchanan)

Whatever the outcome of Britain’s election next week, the outlook for the country’s banks is worsening.

Almost seven years since the industry received the biggest taxpayer bailout in history, public confidence in banks is near an all-time low and lenders’ efforts to boost profit are being frustrated by investigations into alleged currency and interest rate-rigging. Since the coalition government took power in 2010, UK bank stocks have lost 7 percent. Their US counterparts have returned 46 percent.

“You can hardly believe we are now seven years into this crisis, and we’ve still got billions in fines to come and virtually none of the major banks predicting decent returns for at least another three to four years,” said Ed Firth, head of European bank research at Macquarie Group. “If you told us that in 2007, we just wouldn’t have believed it.”

The industry’s prospects look to be getting worse as both major political parties distance themselves from the City, London’s financial district, before the May 7 election. The Bank of England is preparing harsher stress tests this year that may force firms to bolster capital buffers and new rules require expensive firewalls to be created around consumer operations. A levy on banks’ balance sheets has been increased eight times since 2010.

Tarnished bankers

UK taxpayers sunk about 1 trillion pounds ($1.5 trillion) into banks in 2008 and 2009 to prop up the nation’s failing system, and still own 79 percent of money-losing Royal Bank of Scotland Group and a fifth of Lloyds Banking Group. Before the election, the tarnished reputation of the industry has taken another battering with HSBC Holdings embroiled in allegations it aided tax evasion. The Asian-focused lender said last week it may leave London because of rising tax and regulatory costs and Standard Chartered may join them.

The banks remain unloved by the taxpayers who saved them: 68 percent of Britons said it would be good or would make no difference if lots of bankers left the country, according to a survey by polling company YouGov in November. Seventy-three percent want to see bankers’ bonuses capped.

The UK’s four largest banks face 19 billion pounds more in misconduct charges in the two years through 2016, according to Standard & Poor’s. In the five years to 2014, about 7.5 percent of their revenue, or 42 billion pounds, was swallowed by charges for wrongdoing.

Earnings decline

This week’s earnings reports show how the past continues to haunt the banks. Barclays set aside almost 1 billion pounds and RBS another 434 million pounds to settle allegations they rigged currency benchmarks and for selling consumers payment- protection insurance they didn’t need or that didn’t cover them. Meanwhile, Standard Chartered’s first-quarter pretax profit fell 22 percent, with all but one division reporting lower earnings. Lloyds reports on Friday and HSBC next week.

“Conduct and litigation charges are now a way of life for the U.K. banking industry,” said Nigel Greenwood, a credit analyst at S&P. “Some form of charge seems probable every year for the larger banks.”

Britain’s Labor Party is seeking to capitalize on bankers’ enduring bad reputation by pledging a new tax on bonuses to pay for a youth employment program and to increase the levy on banks’ balance sheets. The industry scarcely fared better in George Osborne’s March budget, which boosted the bank levy and barred them from deducting customer compensation from taxable profit, costing the industry 5.3 billion pounds over five years.

Shrinking industry

The UK is introducing some of the world’s toughest rules on financial conduct, including jailing senior bankers for “reckless misconduct” that contributes to a firm’s collapse, as it attempts to focus accountability on individuals, a source of public anger.

The industry is smaller and less profitable than before the crisis. Together, the banks have eliminated 193,828 jobs and cut 1.82 trillion pounds of assets since 2008, according to data compiled by Bloomberg. The leadership at all five banks has changed since the crisis, twice at RBS.

“The regulations continue to change, capital requirements continue to go up and conduct charges continue. There’s no sign of the end,” said Stephen Carter, co-head of financial institutions for Europe, Middle East and Africa at Credit Suisse Group, who advised the UK government on the bailout in 2008. “If the level of capital that’s being held in the banking sector is roughly double what it was pre-crisis, by definition the returns have gone down.”

Profit declines

None of the major British lenders were able to make a return-on-equity of more than 8 percent in 2014, the data show. The average ROE was 17.7 percent in 2007.

After profitability at Barclays, Standard Chartered and HSBC declined in 2014, the three reduced their ROE targets, citing increased regulation, greater capital requirements and high funding costs.

Lloyds and HSBC are the only major UK banks trading above its book value, indicating investors see the other three as worth less than they would receive if the company failed and liquidated its assets.

UK banks’ “problems were deeper than the market realized, most expectations were for a five-year job, but here we are seven years and counting,” said Chris White, who helps oversee about 3.2 billion pounds at Premier Asset Management in Guildford, England. “Banks couldn’t write off everything on day one as their balance sheets wouldn’t have survived, so they’ve stretched out liabilities over a period of time, yet still there’s more work to be done.”

CEOs replaced

Investors have pressured bank boards to replace top executives as the share prices suffered. RBS has fallen 14 percent this year, almost completely erasing its gains in 2014. Standard Chartered plummeted 29 percent last year, followed by a 10 percent drop at Barclays.

Standard Chartered replaced Chief Executive Officer Peter Sands, 53, with former JPMorgan Chase & Co. banker Bill Winters, also 53, and overhauled its board, as it tries to reverse two years of falling profits. It may still need to issue shares to bolster capital, analysts say, and the bank is monitored by the US after breaching a ban on transactions in Iran.

The Asia-focused lender is just the latest to change bosses. RBS has had two new CEOs since 2007, with retail banker Ross McEwan, 57, now in charge. Barclays also picked a consumer banker, Oxford-educated Antony Jenkins, to take over from Robert Diamond in August 2012 after the Libor-rigging scandal.

RBS’s outlook

RBS was meant to have returned to private ownership by last October, according to transcripts of meetings of the Bank of England policy makers that arranged the lender’s bailout. RBS Chairman Philip Hampton, 61, similarly predicted in May 2013 the government would be able to start reducing its stake in 2014.

Instead, the lender, recipient of a 45.5 billion-pound rescue, had its seventh straight annual loss in 2014. In March, it finally gave up its ambitions to be a global bank, and may cut as many as 14,000 investment-banking jobs to refocus on the UK consumer market, according to a person with knowledge of the matter. It had another loss in the first quarter, and the stock still trades below the government’s break-even price, where taxpayers would at least get their money back.

Lloyds progresses

Lloyds, Britain’s biggest mortgage lender, comes the closest to a success story, returning to profit after five years of losses and planning to resume dividend payments. The turnaround comes with an asterisk: It has paid 12 billion pounds to compensate clients for improperly sold payment protection insurance and is still about 20 percent owned by the government that spent more than 20 billion pounds to save it.

Banks also have to contend with new rules forcing them to separate their consumer banks from riskier trading businesses to protect depositors. The move may make investment banking operations untenable for the industry, according to Bill Michael, head of Europe, Middle East and Africa financial services for KPMG in London.

“The fundamental problem with the entire debate post- crisis is that we’ve been unable to separate our response to protecting depositors and taxpayers from other banking activities and it’s paralyzing for the industry,” Michael said. “The sector is still at an inflexion point and won’t look like anything it does now in three to four years because none of these banks’ models are sustainable.”

Bloomberg

HSBC may shut Jersey accounts of UK residents

Bank asks clients to prove ID in attempt to avoid further accusations of helping tax avoidance after scandal involving its Swiss arm

The Guardian, Jill Treanor, Tuesday 17 March 2015

An HSBC branch in Jersey. Photograph: Alamy

HSBC is contacting thousands of holders of Jersey accounts who live in the UK as part of efforts to avoid accusations it is helping to shelter money from tax authorities.

Britain’s biggest bank has written to customers who hold Jersey accounts to ask them to take proof of identity to a branch on the island, or risk having their accounts closed.

The move does not affect customers who hold offshore accounts through its Jersey-based HSBC Expat operation, which is aimed at people permanently working internationally.

The bank, under fire for helping customers of its Swiss arm avoid tax, said: “We continuously review details we hold on all our customers to ensure we have the information we need to protect them, together with wider society, against fraud and other financial crime.

“With financial crime becoming more sophisticated, keeping accurate, up to date information on customers such as complete proof of identity or address, helps us monitor transactions effectively for potential fraudulent activity.”

It is the latest move by HSBC to take risk out of its business and follows its decision to shut accounts for the Vatican, embassy staff and charities in recent months following its £1.2bn fine from US authorities, in 2012, for breaching money-laundering rules and allowing Mexican drug barons to move cash around the financial system.

Last July, HSBC faced criticism after three high-profile Muslim organisations, including Finsbury Park mosque, were told their accounts would be closed.

Other banks have also been taking steps to verify the identity and residence of their account holders in Jersey.

Barclays said: “Barclays takes its responsibilities seriously, whether it is to know our clients, or through compliance with the range of agreements that Jersey has in place with tax authorities.

“We continually review our clients’ portfolios and circumstances to ensure that we remain compliant and that we are offering appropriate services.”

A spokesperson for bailed out Royal Bank of Scotland said: “RBS is committed to working with the authorities to prevent financial crime. We continually review our policies and procedures to ensure we are adhering to the rules and regulations of all the jurisdictions in which we operate. This includes reviewing our customer portfolios to make sure we are both best meeting their needs and remaining compliant.”

Revelations in the Guardian and other publications about the activities of HBSC’s Swiss operations have put a fresh focus on the tax avoidance practices of banks and their wealthy clients.

Leaked details of accounts held at HSBC’s Swiss arm showed how the bank helped wealthy customers dodge taxes and conceal millions in assets, doling out bundles of untraceable cash and advising clients on how to circumvent domestic tax authorities. In 2012, the Daily Telegraph exposed clients of HSBC in Jersey.

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