The City watchdog was not informed about charges that HSBC helped wealthy clients dodge taxes, learning the details of the scandal only through the media, the regulator’s boss has told MPs.
Martin Wheatley, chief executive of the Financial Conduct Authority, said on Tuesday that the broad allegations had been known for years, but the FCA only knew the specifics once revelations were published in the media at the weekend.
HSBC, the UK’s largest bank, is facing fierce criticism from around the world after the Guardian and other news outlets revealed that the bank had helped wealthy clients conceal their money in secret accounts and provided financial services for criminals.
Wheatley, who took charge of the FCA in 2013 with the aim of making the regulator tougher on poor behaviour in the financial sector, said the files referred to historical claims and the bank had since cleaned up its act.
“The allegations are about a Swiss unit of the bank, based on events of predominantly 2005-2007,” he told MPs on the Treasury select committee. “We are very closely monitoring the ability of the bank overall … and we think significant improvements have been made.”
However, asked whether he was confident that the recent run of banking scandals was over, Wheatley said: “No, I am not, because frankly the CEOs don’t know about these skeletons in their organisations.”
Wheatley faced robust criticism from the Labour MP John Mann, who said it was extraordinary that HM Revenue & Customs had not informed the FCA about its investigations into HSBC.
“Something very seriously is going wrong when one arm of government is investigating what appears to be a very, very major transgression and another arm, the conduct authority, isn’t able to do so, because no one has told you,” Mann said.
Wheatley said the FCA was leading a “deep programme of reform” and was making sure banks operated to the highest standards.
John Griffith-Jones, the FCA chair, who was also giving evidence to the select committee, described the allegations about HSBC as scandalous.
But the FCA was forced to defend its record after Conservative and Labour MPs on the committee argued that the regulator was too close to big banks. The FCA was giving evidence on a separate banking scandal dating back to 2001, in which small businesses were mis-sold complex derivative products by the UK’s biggest banks, including HSBC, Lloyds, Barclays and Royal Bank of Scotland.
Wheatley defended the FCA’s handling of that case, saying 14,000 people out of a total of 17,000 had received £1.8bn in compensation, but he acknowledged some people were not happy with these arrangements.
Separately, it emerged that the head of HSBC’s private bank has written to staff condemning practices that allowed clients to hide their money. “The practices and the banking model of that time are no longer acceptable,” Peter Boyles, chief executive of the division since December 2012, said in a memo to staff, Reuters reported.
HSBC has admitted to failings in control and compliance at its Swiss banking arm but says it has taken action to improve transparency.
