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HSBC boss says his tax affairs caused 'damage' HSBC blames local employees for tax evasion scandal
(35 minutes later)
Stuart Gulliver, the chief executive of HSBC, admitted that his personal financial arrangements led HSBC to suffer reputational damage. HSBC executives have refused to take responsibility for tax evasion at the bank, instead blaming local employees.
During testimony in front of MPs on the Public Accounts Committee (PAC), Mr Gulliver blamed "media innuendo" for the damage. Chris Meares, the former head of HSBC's private banking division, told MPs in a hearing he didn't know what employees of HSBC's Swiss arm "were up to".
He said his banking arrangements, which included a Panamanian shell company, were not set up for tax avoidance. "Either you're completely incompetent in your oversight duties or you knew about it," responded Public Accounts Committee (PAC) chair Margaret Hodge.
He further insisted he was fit to stay on as head of HSBC. Ms Hodge also called for ex-HSBC risk chair Rona Fairhead to quit the BBC.
"I would like the chance to finish what I've started," he said, citing his efforts to bring HSBC's compliance procedures into the "highest standards of money laundering controls" during his five years as head of the firm. Ms Fairhead took over as chair of the BBC Trust last year, but before that she was chair of HSBC's audit committee until 2010 and subsequently led the bank's risk committee,
He defended his personal financial structure - which includes being domiciled in Hong Kong, a Swiss bank account, and a Panamanian shell company he once held for privacy reasons - by saying when the accounts were created, he was a junior employee in Hong Kong. "When things go wrong in the public sector on your watch you resign. No one has deigned to accept responsibility," she said during the hearing, adding that Ms Fairhead's performance at HSBC raised serious questions about her current position as chair of the BBC Trust.
"I pay millions of pounds of tax to [the UK tax authority] at the top rate each year," he said. "I think the government should sack you," she said.
'Not accountable'
Information about some 30,000 accounts at the Swiss private bank were leaked in 2007 to French tax officials who passed it on to the UK tax authorities (HMRC). The tax evasion at the bank came to light in February, when the documents leaked by whistleblower Herve Falciani were obtained by the French newspaper Le Monde.
In a joint investigation, the documents were then passed on to the International Consortium of Investigative Journalists, the Guardian newspaper, the BBC's Panorama and more than 50 media outlets around the world.
MPs were harsh in their questioning, insisting that HSBC executives should be held responsible and fired.
"Either you're completely incompetent in your oversight duties or you knew about it," said Margaret Hodge, chair of the PAC.
"I don't believe you didn't know," she added.
Ms Hodge had sharp words for Chris Meares, the former head of HSBC's private banking division, about his role.
Mr Meares refused to take responsibility for Swiss employees, claiming he did not know "what they were up to".
Although he acknowledged he was "fairly responsible" for employees in global private banking, he attributed the lax oversight to "control failings". He added he was unaware of clients taking "bricks" of millions of pounds of cash out of the HSBC private bank in Switzerland.
He attempted to refute claims from MPs that he was being pushed to be the "fall guy" for HSBC's tax avoidance behaviour.
Two weeks ago, HSBC's chairman, Douglas Flint, appeared to blame Mr Meares for alleged collusion between the Swiss private banking division and its clients to evade tax.
Mr Flint told MPs on the Treasury Committee Mr Meares and Clive Bannister, who was boss of HSBC's private banking operations until 2006, "certainly bear fairly direct responsibility for what went on in the private bank during their stewardship".
No common senseNo common sense
BBC Trust boss Rona Fairhead also defended her role at HSBC, where she was chair of its audit committee until 2010 and led the bank's risk committee following that. Information about some 30,000 accounts at the Swiss private bank were leaked in 2007 to French tax officials who passed it on to the UK tax authorities (HMRC). The tax evasion at the bank came to light in February, when the documents, leaked by whistleblower Herve Falciani, were obtained by the French newspaper Le Monde.
She is currently chair of HSBC's North American division, and has been a member of the bank's board since 2004. She took over as the chair of the BBC Trust last year. In a joint investigation, the documents were then passed on to the International Consortium of Investigative Journalists, the Guardian newspaper, the BBC's Panorama and more than 50 media outlets around the world.
Ms Fairhead said HSBC had the proper structures in place while she was in charge of the audit committee, but the realities of the banking industry changed. Ms Fairhead said HSBC had the proper structures in place while she was in charge of the audit committee, but the realities of the banking industry had changed.
"As we acquired more businesses it became more complex and there were a huge number of standards on money laundering and tax that we were complying with," she said."As we acquired more businesses it became more complex and there were a huge number of standards on money laundering and tax that we were complying with," she said.
"We got to the stage where a 130-year-old, 140-year old structure was no longer fit for purpose.""We got to the stage where a 130-year-old, 140-year old structure was no longer fit for purpose."
She said the board relied on information from local managers, and blamed Swiss employees for lax oversight.She said the board relied on information from local managers, and blamed Swiss employees for lax oversight.
In response, Ms Hodge chastised Mrs Fairhead and Mr Meares, saying the bank's procedures were "rich in bureaucracy and short of common sense". Local actors
"When things go wrong in the public sector on your watch you resign. No one has deigned to accept responsibility," she added, saying that Ms Fairhead's performance at HSBC raised serious questions about her current position as chair of the BBC Trust. This is the second time HSBC executives have been called in for questioning by MPs.
"I think the government should sack you," she said. Despite harsh questioning from MPs, Mr Meares acknowledged that while he was "fairly responsible" for employees in global private banking, the tax evasion was a result of "control failings".
He refuted claims from MPs that he was being pushed to be the "fall guy" for HSBC's tax avoidance behaviour.
Two weeks ago, HSBC's chairman, Douglas Flint, appeared to blame Mr Meares for alleged collusion between the Swiss private banking division and its clients to evade tax.
Reputational damage
During the hearing, Stuart Gulliver, the chief executive of HSBC, admitted that his personal financial arrangements had damaged the bank's reputation.
Mr Gulliver blamed "media innuendo" for the damage.
He said his banking arrangements, which included a Panamanian shell company, were not set up for tax avoidance.
He further insisted he was fit to stay on as head of HSBC.
"I would like the chance to finish what I've started," he said, citing his efforts to make HSBC's compliance procedures the "highest standards of money laundering controls" during his five years as head of the firm.
He defended his personal financial structure - which includes being domiciled in Hong Kong, a Swiss bank account, and a Panamanian shell company he once held for privacy reasons - by saying when the accounts were created, he was a junior employee in Hong Kong.
"I pay millions of pounds of tax to [the UK tax authority] at the top rate each year," he said.
HSBC has been involved in a range of banking scandals, including foreign exchange manipulation and rigging of international interest rate benchmarks.HSBC has been involved in a range of banking scandals, including foreign exchange manipulation and rigging of international interest rate benchmarks.