Wednesday, June 10, 2015

Large banks are now, finally feeling the impact of their dishonesty!

The global financial crisis, which has caused such vast financial damage to the interests of thousands of investors and working people, and which has cost the tax payer billions of pounds to prop-up bankrupt financial institutions, was caused, primarily, by the greed and the dishonesty of the major banking system.

For years, the banks had engaged in a series of dishonest and flaky practices which had generated significant profits for them and their investors, and which had been carried out at the expense of the funds of their depositors and customers.

There was a time, not so long ago, when the ambition of every finance CEO was ‘to get as big a share of the customer’s wallet as possible’. Tactics designed to ‘cross-sell, up-sell’ to clients were promoted, and staff were encouraged to aggressively promote new products and services to clients, designed to capture a bigger share of their capital.

It seemed you could not go into a bank or building society without having some new financial product, credit card or loan facility stuffed down your throat. And of course, with every new financial product, came a commensurate encouragement to take out a PPI contract. Of course, you were not to know that the likelihood of the PPI insurance product to operate in your favour should you have need of recourse to its facilities was largely illusory, you were just cheated into believing that you were somehow covered by an insurance umbrella. That justified your taking out the loan, which in many people’s cases, they could not really afford.

There was a kind of collective hysteria gripping the market as ordinary working people were encouraged by slick-talking salesmen to extend their debts, to re-mortgage their houses in order to pay for foreign travel or holidays, secured on credit card debts.

It suddenly seemed as if the whole world was on a huge debt binge, borrowing money without any thought of how it would be re-paid, and this money didn’t even exist! It was being printed by the banks that were operating, as always, with one eye on their bonus targets. These targets were becoming more inflated and staff were being forced to work ever harder to make their numbers, but it didn’t matter, because the banks were busily ‘securitising’ the debts being created, and sold off to other investors who re-packaged these debts in their turn and who sold them on to further groups, generating even more commission for themselves and their institutions.

The whole thing became a merry-go-round of greed and fraud, but no-one seemed to care, as long as the spin-off of constant revenues was maintained.

These frauds were being practiced at the same time as the more traditional models of criminality which underpinned the banks’ balance sheets were being continued. International money laundering on an institutionalised scale was being promoted, and the regulatory controls which were supposed to prevent global money laundering were identified by their absence. It was almost as if the major banks had decided to individually ignore the rules and regulations on money laundering, because they had discovered that the facilitation of money movements for organised crime paid significant profits and dividends.

HSBC were able to demonstrate this very effectively because in 2012 HSBC Holdings Plc agreed to pay a record $1.92 billion in fines to U.S. authorities for allowing itself to be used to launder a river of drug money flowing out of Mexico and other banking lapses.

Mexico's Sinaloa cartel and Colombia's Norte del Valle cartel between them laundered $881 million through HSBC and a Mexican unit, the U.S. Justice Department said.
Stuart Gulliver described this level of drug money laundering as a ‘mistake’!


Of course, at the same time as engaging in money laundering on an eye-watering scale, HSBC was offering its high-net worth clients an opportunity to engage in institutionalised levels of tax evasion, through the facilities offered by their Swiss branch in Zurich. 

Of course, we have no means of knowing how much money HSBC was taking in terms of profits and revenues for providing this service. But one must imagine it was not insignificant.
Stuart Gulliver later apologised for the damage this episode had caused to the bank’s reputation.


More recently there have been the huge fines which HSBC has had to pay for their part in the Libor and Forex manipulation escapades.

In the Forex scam, one HSBC trader complained in an email to another team member who had not given him the information he needed: “You are useless... how can I make free money with no fucking heads up.”

Now, it appears that HSBC has got a lot of difficult questions to answer following the revelations in the FIFA bribery scandal.

Some of those questions involve transactions including;

 *A $1.2m wire transfer from a Traffic bank account in Miami to a correspondent HSBC account in Buffalo, New York, which was then sent to a HSBC Hong Kong account of a front company for another co-conspirator on November 13, 2012 

*Two wire transfers of $750,000 and $250,000 from the HSBC Hong Kong account to a New York account of Standard Chartered, for credit to a Cayman Islands account held by Kosson Ventures, a company controlled by Costas Takkas, the attaché to Fifa vice president Jeffrey Webb on November 21, 2012

 *A $500,000 payment from another sports marketing company on December 5 2013 for credit to the HSBC account of a luxury yacht maker in London. Barclays and HSBC have not commented on the matter.

Why am I not surprised.

The purpose behind my reiterating these disgraceful events is to amplify the level of wrong-doing and criminal law-breaking which HSBC has indulged in the past years, activities which have generated huge profits for them, profits which have lined the pockets of their investors.

HSBC has behaved exactly like a main-stream Mafiosi crime group, engaging in criminal behaviour as a matter of course, and taking inflated profits from the outcome of these activities.

Had it been any other organisation which had engaged in these criminal enterprises, the Government would have had little choice than to throw the book at them, ordering wholesale criminal investigations and demanding serious penalties and sentences.

For some reason, because these actions are committed by banks, no-one is at all fazed by these actions. The regulators have done little or nothing to bring this recalcitrant bank to heel, and all Stuart Gulliver has done is to wring his hands and apologise ineffectively.
So now, Mr Gulliver has announced his plans to readjust his banking empire. 

HSBC has been under severe pressure since the 2008 financial crisis to cut costs, meet stringent new regulatory demands and satisfy restless shareholders.

To that end, the British bank said on Tuesday that it would shed as many as 50,000 of its approximately 250,000 jobs as it sells several underperforming businesses, reduces the size of its global investment banking business and tries to cut billions of dollars in costs.

The latest moves are part of HSBC’s major strategic revamping . As part of the newest changes, HSBC said it would increase its investment in Asia, where it generates more than half of its earnings. The bank has been evaluating whether to move its headquarters to Hong Kong from London, and it said it would complete that review by the end of the year.
The bank, which traces its roots to Hong Kong and used to be called the Hongkong and Shanghai Banking Corporation when it was founded, still has close ties to the Asia-Pacific region. Asia accounted for 78 percent of the bank’s pre-tax profit in 2014.

Mr. Gulliver is under increasing pressure to satisfy investors after recent scandals damaged the lender’s reputation. HSBC also faces an increasingly challenging regulatory environment in Britain and across the globe. The bank’s shares have fallen about 2.4 percent in the last year.

“We recognize that we need to do a lot more to address the changing environment,” Mr. Gulliver said.

Among the moves announced on Tuesday, the bank said it would eliminate 22,000 to 25,000 full-time jobs, or about 10 percent of its work force, by the end of 2017. About 8,000 of the job cuts are expected in Britain, where HSBC employs about 46,000 people.

The bank faces a major conflict of interests. 

Its investors and shareholders are complaining vociferously that the bank is not paying the level of dividends they are used to. Well, this is hardly surprising, the bank has been forced to step back from its organised criminal enterprises, and has had to start to make money out of straight-forward vanilla banking activities.

They have discovered the truth of one of my major assertions which is that the global banks cannot return the same level of investment revenue without committing criminal offences. 

They simply cannot make the profits they have hitherto made, without breaking the law, and the increased regulatory environment, which is long overdue, is making it so much harder for the dirty banks to make dirty profits.

They are responding by a major policy of staff-shedding, and by almost certainly shedding their UK retail arm.

They are reverting to an earlier incarnation whereby they will focus their business attention on China and the Far East. Well, this at least should help them build up their profits again, because this area of the world is notorious for the movement of the proceeds of corruption and other forms of dirty money. If they move their HQ from London and re-engage in Hong Kong, they should be able to get back to their dodgy business activities without too much of a time-break. They started life as a drug bank to British opium dealers in the nineteenth century, and their recent activities in Mexico demonstrate that they had clearly forgotten nothing in the interim.

I don’t personally think it will do them much good. The American have now got HSBC clearly in their sights, their latest escapades in the FIFA money laundering will not have gone down well with the US authorities.

Even if they relocate to Hong Kong, the US law enforcers can reach out to them there if they continue to transact business in US dollars. However, there is too much dirty money floating around in China and the Far East for HSBC to resist, and I predict that if they do go back (I still think it is unlikely), they will be up to their elbows in black money before you can say ‘Fei Chien’ (flying money)!

These latest proposals by HSBC management are yet another attempt to bring pressure on the UK Government, to back pedal on the implications of the new regulatory environment, the ring-fencing of retail banks, and the new regime of anti-money laundering.

The Government must not weaken in their resolve to force these criminal enterprises to get back to the straight and narrow. By making a significant number of UK employees redundant and by chopping British jobs, as a programme of re-positioning, HSBC are throwing down a gauntlet to George Osborne. ‘Look how much damage we can cause to British jobs if you force us to smarten up our act’.

This is yet another example of the culture of bullying these banks operate within and shows, if such a lesson needed learning, that they have no concern for UK workers and who are expendable when the bank’s creditors start pushing for more and bigger dividend payments.

The cynicism behind this action is breathtaking, and George Osborn needs to remember this when ‘friends’ of Stuart Gulliver start jockeying and lobbying for him to be given a knighthood!

Sunday, June 07, 2015

Why George Osborne must not kow-tow to the Banks over regulatory requirements!

The Sunday Business supplements are all carrying stories about George Osborne’s plans to offer an olive branch to HSBC in the form of a levy retreat.

The Sunday Times reports that Osborne is expected to use the opportunity of his forthcoming Mansion House speech on Wednesday to lay the ground for a review of the bank levy, in an attempt to head off a threat that HSBC and Standard Chartered Banks may leave the UK and relocate their HQ’s elsewhere.

Osborne is expected to offer a typical platitude of saying that the Conservative Government is committed to maintaining the ‘competitiveness of banks’, whatever that means!

The levy is a global charge on bank assets and it was introduced by the last Coalition Government as a means of helping to raise money to counter the appalling damage caused to the country and its economy by the criminal rapaciousness of the banks in the run-up to the financial crisis. 

We must never forget that it was the criminal irresponsibility of the banks, exacerbated by the greed and dishonesty of the banking sector employees which predicated the collapse in banking values and which identified the creation of a mountain of debt, supported by little more than hot air, and lies.

The Government was forced to extend multi-billions of tax-payers’ funds to shore up criminal institutions which were in severe danger of collapsing due to mis-management, hubris, incompetence, and downright fraud,  but no-one within the banking sector was brought to justice or sent to gaol for their dishonesty.

Imposing a levy on bank assets was nothing more than a legitimate and much-needed requirement to begin to redress the balance sheet and make the banks realise just how irresponsible they had been. Nothing hurts banks more than Government imposing a tax on their assets. Fines don’t hurt because they are paid by the shareholders.

And the banks’ response?

Well, they have huffed and puffed, and postured and threatened, in fact behaved exactly like the bullies they are. They have reached out to their friends in the media and in the PR business, and encouraged them to peddle soft-soap stories about the damage that might be caused if they ‘are forced’ to leave the UK.

Excuse me, what ‘damage’ which might be caused! Haven’t they caused enough damage already with their criminal actions and dishonest business methods. Haven’t they brought the name of the British banking sector into disrepute everywhere in the world by their refusal to comply with the simplest regulations, designed to protect the integrity of business and protect client’s funds?

Instead of acknowledging their disreputable tactics and dishonest methods, and invested enough time and energy into developing a new climate of best practice and compliance, they have moaned and whined, bleated about the unfairness of being accused of wrong-doing, and then, when the Americans started to dish out some really serious penalties, and started kicking some well-tailored butts properly, they complained at the unfairness of the fact that a foreign regulator was hitting them harder than their own people.

Having been dealt with for laundering vast sums of money for foreign organised criminal entities, and breaking international sanctions on an institutionalised scale, one might have thought that these egregious crooks would shut up and stay quiet, but instead, they have begun to posture and preen and contest the legitimacy of the plans that the Government has to try and introduce a better regime of control and client protection into their banking sector.

One unnamed banker (how typical, these creatures never want their name to be known in public) has said that a mere change to the banking levy might not be enough to keep HSBC in Britain. “...’It’s not just the levy’, he said, ‘it’s the ring fence (the forced separation of retail and investment banking), coupled with the new regulations for senior managers, (the regime which applies special responsibilities to senior bankers which could make them liable to go to gaol in the event of the collapse of their bank), ‘it’s everything...”

When the proverbial brown stuff was hitting the air conditioning about banking fraud, the constant complaint was that no-one could be prosecuted because no-one was to blame. When proposals were laid for a new regime of responsibilities, identifying senior bankers as those who must, in return for their ludicrous salaries, perks, benefits and bonuses, be considered to be responsible for the control of banks, they suddenly all jumped up in panic and denied ever wanting to be considered to be a responsible person.

I don’t know about you, but this says everything to me about what the insiders know about the level of criminality inherent in the banking sector.

They have been doing what they always do in these circumstances, and have spent a lot of time and money, lobbying H.M.Treasury over the quality and content of what they consider to be Draconian regulations.

One wonderful UK based fund manager (how these people always fail to appreciate the stupidity of their public utterances)  has been quoted as saying;

“...HSBC could free up about £1 billion of cash to share out with shareholders if it didn’t have to pay the levy...I hope it leaves, it would teach the Government a lesson...”

This person has clearly forgotten the level of fines and costs and lawyer’s fees HSBC has had to pay out to regulators for committing global criminal offences. I imagine the share out for the shareholders would be significantly more if HSBC had decided to obey the law instead, and not got caught committing minor peccadilloes such as laundering billions of dollars for the Mexican mafia drug cartels, among some more of its esoteric acrivities!

It is this kind of rank hypocrisy that always makes me laugh when I hear the moans of some of these bloated plutocrats who think that the City of London is their personal private playground and none of the UK’s laws should apply there!

Even members of the ‘Great and Good’ are lining up to tell Osborne what to do about the issue of financial ring-fencing.

Sir David Walker, who once headed up the now deeply discredited regulatory body, the Securities and Investments Board, has said there was ‘an urgent and compelling need’ to review the ring fence scheme. 

Just in case you are not fully au-fait with this esoteric piece of banking practice, the ring-fence requirement is one which makes it imperative for big banks to put their retail arms into stand-alone companies by 2019. 

I know, it’s a truly shocking requirement, and one which should make any self-respecting banker puce with anger! After all, it means that the funds of depositors will be sacrosanct, protected, ring-fenced from the capital availability of the wholesale arm of the bank, and not available to be used to underpin any dodgy financing ploy or scheme which the financiers and the investment bankers might be wanting to hatch.

It means that in the event of the wholesale arm of the bank going belly-up through some wild frolic of its managers, the funds of the clients of the bank will not be put at risk (which will of course limit the amount of compensation which depositors would need to claim from the Depositors Protection Scheme). The effect of this requirement would therefore be to encourage depositor confidence and to limit the damage that might be caused to their savings that could be caused by the banks engaging in a similar kind of wild speculation they were indulging in, prior to the financial crisis!

No wonder the bankers don’t want this requirement to stand, and it is a red line which Osborne must not cross.

No, all this talk of leaving the UK and relocating to other countries is a lot of hot air.
It is the usual kind of gamesmanship that these rank bullies indulge in when they cannot immediately get their way when they demand it.

Why am I so positive?

Right now, the City of London is the head of the global banking world and they are safer here than they would be elsewhere. HSBC is still under fire from the fall-out from its Swiss arm’s, tax-evasion scandals, and there are no doubt a number of US citizens whose funds may have been embroiled in this fiasco. The US authorities will take a very dim view of any such actions and will be looking for investigatory cooperation. There is also the small matter of the handling of the FIFA bribes cash. The deferred prosecution agreements still extant in the US mean that the American arm of HSBC is still needing to stump up singularly large sums of capital adequacy.

Moving back to Hong Kong will also have a reputational risk issue as well. Many investment professional are eyeing such a possible move with positive approval, believing, most probably quite accurately, that operating in a less well-regulated environment will mean that HSBC can earn bigger profits and thus pay bigger dividends. But there is a downside!

Most investors couldn’t give a flying fig for the reputation of the environment within which the money that pays their returns on investment is made, they just want to be paid as much as possible.

So although a move back to Hong Kong would mean happier shareholders, it would also be another dodgy reputational move. Based in Hong Kong, the Americans would look upon HSBC with positive distaste and be most unwilling to give them the benefit of the regulatory doubt, next time they get into trouble. And get into trouble they will, it’s in their DNA!

All in all, I do not believe that all the wives of the HSBC directors fancy too long an extended stay in Hong Kong. Nice for a visit, but a bit too claustrophobic for any great length of time.
My money is on them staying in the City for the foreseeable future, because that is where the centre of financial power lies. 

Speaking entirely for myself, I would love to see the back of them, but I don’t think it’s likely to happen. If they do stay, they must be made to comply with the regulatory standards that the FCA demands, and if they fail, then they must be made to pay commensurately.

Saturday, June 06, 2015

When will our banking regulators start to stand up to the banks and begin to take them on?

This question is predicated by a column heading in The Times of June 5th entitled “...Now Lloyds faces £100 million fine for PPI complaints mishandling...”

The Financial Conduct Authority found the state-backed group had wrongly denied compensation to customers over payment protection insurance (PPI) - the wider scandal that has already cost Lloyds £12 billion.

I have repeatedly stated that the British banks behave as if they are a law unto themselves, and they keep on proving me right.

They conduct themselves in the most blatantly criminogenic manner, committing financial crimes on a wholesale basis. They conduct themselves like early 20th century Mafiosi crime gangs, and it appears that nothing can be done to bring them to heel!

Sorry, someone help me please! What is this ‘mishandling’ we are now being told about?

It relates to a period from March 2012 to May 2013 when the group assessed customer complaints relating to more than 2.3 million PPI policies and rejected 37% of those - many of them wrongly. 

Lloyds apologised to customers affected.

Staff at Lloyds largest complaints handling centre were deliberately and cynically being taught ways to ensure customers got the minimum or no compensation, including initially rejecting claims, as many people, it was believed, would not pursue the matter.

The FCA found that in March 2012, Lloyds issued guidance to complaint handlers that its overriding principle when assessing complaints should be that PPI sales processes "were compliant and robust unless told otherwise".

This resulted in some of them dismissing customers' personal accounts of what had happened to them during the PPI sale.

In addition, Lloyds did not notify complaint handlers of known failings that had been identified in its PPI sales process.

Some customers were told that their complaint had been "fully investigated" when this was not the case.

Oh right, I’ve got it now, ‘mishandling’ is just another bankers’ weasel word for the deliberate and wilful ignoring of the regulator’s stated requirements that the bank should recompense clients for the cynical and deliberate exercise of fraud and criminality they had engaged in for years.

I mean, it was not as if Lloyds didn’t have form for dragging their feet over paying back the money they had nicked from their hapless clients. Only 2 years ago, Lloyds was fined £4.3 million for delays in making compensation payments to more than 100,000 clients who had been defrauded in the so-called PPI-mis-selling scam. (Mis-selling was another piece of verbal double dealing, and meant fraud on an institutional scale)!

Clearly, that fine taught Lloyds not to do it again and get into compliance, and this is what I mean when I pose the question; ‘What can be done to get these bastards to toe the line?

Their response to their regulator was no doubt to issue a lot of verbal garbage about putting customers first, and learning lessons from the past, but in reality, they were merely sticking two fingers up at the FSA and then the FCA, and carrying on ignoring the instructions of the regulator.

The big problem is that the regulatory agencies must start to behave as if they really do mean business and stop mealy-mouthing about what they see as their regulatory responsibility.

They have a raft of penalties available to them, including one which enables them to define an individual in the industry as ‘not fit and proper’ to have the control of a regulated entity.

I believe that this finding ought to be directed at every member of the Lloyds main board, and they should start packing their bags immediately and clearing their desks. They have openly connived at PPI wrongdoing for years, and now, when the chips are down and they are required to pay for their misdeeds, they simply do everything in their power to avoid the likely consequence of their criminal actions.

The fine is the largest ever retail banking penalty imposed by the authority - other larger charges have related to trading scandals such as Libor benchmark rate-rigging and foreign exchange rate manipulation. But fines are not a proper penalty for board members who simply will not do what they are instructed to do by their regulator. They have to be taught a hard and painful lesson, and we should start by ejecting them from the financial sector for life. Fines are not paid by these mafia goombahs personally, their impact falls entirely on the shoulders of the shareholders of the bank, so other means have to be found to name, shame and punish these organised criminals.

Lloyds has been the worst-hit by the PPI mis-selling scandal, having set aside a total of £12 billion out of a running total for the whole industry of £26 billion.

Georgina Philippou, acting director of enforcement and market oversight at the FCA offers the usual regulator-speak bromides by way of public statement. She is reported to have said: "If trust in financial services is going to be restored following the widespread mis-selling of PPI, then customers need to be confident that their complaints will be treated fairly. 

"The size of the fine today reflects the fact that so many complaints were mishandled by Lloyds.

"Customers who had already been treated unfairly once by being mis-sold PPI were treated unfairly a second time and denied the redress they were owed. Lloyds' conduct was unacceptable."

Making public utterances such as these go nowhere near defining the level of egregious conduct or dishonest behaviour that Lloyds has engaged in.

Ms Philippou frankly needs to rethink her approach to her role. If she honestly believes, after all this time and evidence of concerted wrong-doing and criminal damage that has been caused to the banking public that ‘trust in financial services is going to be restored’, she is kidding herself. Trust in banking will never be restored until the mafia bosses who are running these organised crime families are brought low and gaoled, named and shamed for their wilful failure to run decent and honest institutions. 

Instead what are we faced with? More public utterances which manage to diminish the sheer scale of the wrong-doing to a level equivalent to cheating at Scrabble.

Mr Horta-Osorio (Lloyds Bank CEO) said: "We made mistakes in our handling of some PPI complaints. I am very sorry for this. We have been working hard with the FCA to ensure all customers receive appropriate redress.

"That process is now substantially complete. We remain fully committed to improving our operational procedures and ensuring we do the right thing for our customers."

Yeah, yeah, yeah, yadda, yadda, yadda! It’s just the same old, same old, all over again, until the next time. And there will be a next time, depend on it. These banking crime gangs can’t make their numbers, and their executives cannot get their obscene bonuses without committing major crimes. They are already proving that as bank after bank cuts down on what were once big revenue generators, but which are now, increasingly unprofitable business centres.

Today's fine comes days after the Government fired the starting gun on a £4 billion "Tell Sid"-style share sale to be launched within the next 12 months as it seeks to sell off more of the taxpayer stake in Lloyds.

Lloyds was rescued by the taxpayer at the height of the financial crisis, but the Treasury's holding has since been shrunk from 43% to just under 19% as parcels of it have been disposed of on the stock market.

The group has faced a series of fines in recent years. Last July it was hit with penalties totalling £218 million by the FCA and US regulators over benchmark rate-rigging practices.

These included an attempt to rip off the Bank of England over its financial life support scheme, behaviour described as "highly reprehensible" by Bank governor Mark Carney.

In December 2013, Lloyds was fined £28 million over incentive schemes that rewarded staff with "champagne bonuses" and put advisers under pressure to hit sales targets or face demotion.

Lloyds has a rap-sheet longer than that of Ronnie Kray!

They have repeatedly committed gross financial crimes of every kind, and they keep on getting fined for wrong-doing.

Not that any of this seems to impact upon Mr Horta-Osorio? I don’t want to give the impression that he has not been impacted by these fines, the chief executive’s bonus was reduced, by about £360,000, but he could still be in line for a £4m payout from bonuses awarded in 2012 and 2013 – the period when the bank was found to be treating customers unfairly – and another £6.4m from a long-term scheme.

A £10.4 million bonus, eh? That should take the sting out of any opprobrium he might receive for treating his customers unfairly!

George Osborne has gone on the record today saying the time for banker bashing is over, that the banks have reformed and are operating under new rules! 

He is wrong, the leopards have not changed their spots, and they will continue to rip off their customers at every opportunity. They can’t help it, it is engrained in their DNA. We must continue to bash these bastards at every possible opportunity!