The banking sector hardly needs another scandal. In the past two weeks, one big bank has been unable to give its customers their money; another was fingered for fiddling a benchmark rate for trillions of dollars in derivatives contracts; a third stands accused of preying on minorities. Now HSBC is due to appear before a US Senate investigative committee, charged with dereliction of its duty to prevent money laundering.
What the London-based bank’s US division has or has not done will only become clear in the hearing and once an expected settlement with US authorities is ready. But HSBC is subject to investigations that the bank admits risk landing it with significant fines – up to $1bn, some analysts say. If fines in the hundreds of millions become the norm – ING paid $619m to settle charges of sanctions violation; Barclays is coughing up £290m for rigging Libor – we could soon be talking real money for banks.
With the world’s biggest banks entangled in investigations, it is foolish to think that the industry, already scraping the bottom of the barrel of public goodwill, has put the worst behind it. One estimate sees 12 banks linked to Libor probes facing $22bn in costs. Executives cannot afford not to clean house – and be seen to be doing so – if they want to be able to focus on their core business rather than constant reputational firefighting.