The scandal over CEO Stuart Gulliver’s finances was broken Sunday by the Guardian newspaper in the wake of revelations that HSBC coached its clients on how to hide their wealth using Swiss bank accounts.
The Centre for Investigative Journalism and CBC were among the media outlets revealing last month that the British bank helped hundreds of people, including wealthy Canadians, hide Swiss accounts from authorities to avoid paying millions of dollars in taxes.
The bank released a statement saying Gulliver had paid tax to the U.K. on his worldwide income since returning to the U.K. to live. He previously was based in Hong Kong and paid Hong Kong taxes, the bank said.
There was fresh disappointment over the bank’s earnings, which fell 16 per cent in 2014 to $13.7 billion US.
Penalties for price-fixing
Among the contributing factors to the loss were $550 million the bank set aside last year to cover penalties for manipulating foreign currency markets. That comes two years after it was caught in a money-laundering scandal.
In Canada, HSBC said fourth-quarter profit was down 11.2 per cent from a year earlier to $206 million Cdn, which according to the bank is a result that reflects lower consumer spending and higher costs.
In a written statement, chairman Douglas Flint said HSBC is addressing the wrongs by its private Swiss bank exposed by journalists earlier this month.
"The recent disclosures around unacceptable historical practices and behaviour within the Swiss private bank remind us of how much there still is to do and how far society's expectations have changed in terms of banks' responsibilities," he said.
Flint is due to appear before British lawmakers on Wednesday to answer questions about the bank's alleged complicity in tax evasion.
CEO's 'privacy' defence
In a conference call, Gulliver defended his use of a private bank account in Panama, saying he used the account to keep his earnings private from others within the company.
Other executives at HSBC's Hong Kong offices were able to see what their colleagues were earning, he said, adding the account "enabled me to have confidentiality within my own firm.”
The bank account in Switzerland was set up in 1998 to hold bonus payments, but Gulliver claimed he declared this account to U.K. tax authorities.
The bank said Gulliver’s compensation for the year would be reduced five per cent to £7.6 million ($14.7 million Cdn) because of the bank’s poor performance.
Gulliver said HSBC’s declining financial results were a result of rapid growth that had caused control issues. HSBC, founded 150 years ago as the Hong Kong and Shanghai Banking Corp., now has more than 6,100 offices in 73 countries.
Barclays viewed HSBC’s disappointing results in Canada as an indication of more declining profits among Canadian banks.
Weaker credit in commercial banking including higher credit risk and more loan impairments, in part from the oil and gas sector, could “resonate across the Canadian banks," Barclays said in a note to investors.Suggest a correction