The Banking Saga: HSBC, Del Missier and Mervyn King squirm

As authorities on both sides of the pond intensify their scrutiny, and holes start to appear in the testimony of management figures, the plotting and intrigue start to be revealed.

by Michael Northcott
Last Updated: 19 Aug 2013

It’s been a dramatic few weeks for banking, as UK and US authorities operate what seems to be a pincer movement on several banks. Last night, Jerry del Missier, the former Barclays COO gave evidence to the Treasury Select Committee that conflicted with former CEO Bob Diamond’s testimony from the week before. This morning Mervyn King is being questioned by MPs over the Libor fixing scandal, and in the US, the Senate has accused HSBC of having ‘acted as a financier to drug gangs’. So a pretty messy morning for the global financial industry and what is left of its reputation. 

Last night, Missier became the third Barclays executive to give evidence on the Libor fixing scandal and, in a blow to Diamond, claimed that the latter had instructed him to get the Libor rates down – something Diamond denied to MPs. Del Missier did not go so far as accusing Diamond of lying, but the discrepancy between the two stories has drawn a lot of attention in the media and will not go unnoticed if there is some kind of judge-led inquiry into the scandal at a later date. Diamond maintains that he knew nothing of the rate fixing until just weeks ago, and that the practice was confined to a group of just 14 rogue traders. Hmmm… where lies the truth?

This morning, the governor of the Bank of England, Mervyn King, faced the Treasury Select Committee, answering questions on his economy-nursing techniques (such as quantitative easing) and about just how regularly the Bank spoke to other financial institutions. He claimed this morning that the first he heard of any Libor wrongdoing was when the FSA reports came out just two weeks ago, and that no one in the Bank of England had any evidence of wrongdoing before that point. With his characteristic grabbing of the moral high ground, we reckon the public will be more inclined to believe Merv than the smiling assassin that is Bob Diamond. But this isn’t quite right: the emails between Barclays executives and the deputy governor of the BoE, Paul Tucker, are evidence that there was actually a regular stream of communication and a solid awareness that rate-fixing existed, at the least in other banks. Perhaps Mervyn has forgotten just how much material has found its way into the hands of the media over the past few weeks…

Finally, HSBC has found its situation worsening in the US. Last week, we reported that the bank could be fined around $1bn by US authorities for failing to maintain adequate systems to avoid financing crime or terrorism. Senate investigators have claimed in a report that the bank ignored warnings that the US financial system may have had exposure to drug money or terrorist financing, thanks to HSBC’s activities. Investigators also claim the bank waived measures designed to prevent money laundering for some of their wealthy clients. 

While the saga of investigations into all these people and banks continues, one thing is clear: governments seem finally to have manned-up and started asking some serious questions. Whether or not we’ll see any heads roll is a different matter, but their stance on financial institutions will definitely be part of the battleground and be an issue in the next elections. One thing’s for sure: we, the general public, are the losers in this…

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