Respite for HSBC: French Probe Bail Reduced to 100M Euros - Analyst Blog
The formal criminal investigation initiated by the French magistrates against HSBC Holdings plc HSBC has not been settled yet, but the UK-based bank can breathe a sigh of relief with the excessive bail amount of €1 billion ($1.1 billion) demanded by the French authorities easing to €100 million.
Flashback
In April, HSBC disclosed the French probe regarding the alleged wrongdoing by its Swiss Private Bank in 2006–2007 in relation to tax matters. Though no charges were placed on the bank, it was asked to submit a bail amount of €1 billion, which is around half of the suspected fraud of €2.2 billion.
HSBC’s Swiss unit has been hit by several probes and charges including accusations of aiding wealthy clients to evade taxes and obscure assets worth millions of dollars. These claims were accepted by the bank after media reports were spurred by documents obtained by the French newspaper Le Monde from the International Consortium of Investigative Journalists (“ICIJ”).
The documents were handed over to the European law enforcement authorities by a former employee, Herve Falciani, which triggered the investigation. These files described incidents where HSBC‘s Swiss private banking unit regularly permitted its clients to withdraw a large amount of cash (mostly in foreign currencies), marketed schemes that enabled wealthy clients to avoid European taxes and colluded with clients to hide clandestine accounts from domestic tax authorities.
Depositors at HSBC’s Swiss unit included royal families, convicted drug dealers, ambassadors, terror suspects, elected officials, corporate executives and athletes. Moreover, the company is already facing criminal investigations and charges in France, Belgium, the U.S. and Argentina, owing to the leakage of files.
Our Take
Last year, HSBC’s Swiss private banking unit was hit by tax fraud and money-laundering charges by the Belgian law enforcement agency. Additionally, HSBC has been under investigation by the U.S. regulators, over similar tax evasion charges. With such ongoing investigations and bail money being imposed on the company, its bottom line would be strained.
Notably, the U.S. prosecutors have already settled such charges with Credit Suisse Group AG CS and UBS AG UBS. Also, UBS had to shell out €1.1 billion imposed on it by the French authorities for illegally soliciting clients in France to open Swiss accounts for hiding undisclosed wealth in the period between 2004 and 2012.
Currently, HSBC carries a Zacks Rank #1 (Strong Buy). BBVA Banco Francés S.A. BFR is another foreign bank carrying the same Zacks rank as HSBC.
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