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Spectre Of FX Scandal Returns To Haunt HSBC

Spectre Of FX Scandal Returns To Haunt HSBC

The spectre of the foreign exchange-rigging scandal will return to haunt HSBC today when it sets aside hundreds of millions of pounds more to cover future settlements with regulators.

Sky News has learnt that Europe's largest bank will disclose in its interim results that it is adding a substantial sum to the $550m (£352m) provision it has already allocated to resolve a number of investigations on both sides of the Atlantic.

Insiders said on Sunday that HSBC would announce an overall charge of well over $1bn (£640m) to cover conduct issues including the FX probes, but said that it would not provide a breakdown of the numbers.

The latest provisions will come nearly nine months after HSBC was among six banks to pay fines to the UK's Financial Conduct Authority (FCA) and the US's Commodity Futures Trading Commission (CFTC) over the FX scandal.

HSBC's bill last November came to more than £390m, but investigations by the Department of Justice and European authorities are continuing, and are expected to result in further hefty fines.

Stuart Gulliver, the bank's chief executive, is likely to face questions today about the potential timing and scale of further settlements on FX-rigging, as well as the progress of an FCA probe into allegations that HSBC's Swiss private bank helped wealthy clients to illegally avoid taxes.

In HSBC's annual report this year, Mr Gulliver said it had been "badly let down by a few individuals whose actions do not reflect the vast majority of employees who uphold the values and standards expected of the bank", adding that the issue was "rightly in the hands of the Serious Fraud Office".

The continuing cost of past misconduct has weighed on the half-year results of other major UK banks, including Lloyds Banking Group, which last week added £1.4bn to its bill for mis-selling payment protection insurance.

Earlier this month, George Osborne effectively sacked the FCA's chief executive, Martin Wheatley, saying that he wanted a "new settlement" for the UK banking industry.

However, many City observers are sceptical about regulators adopting a more relaxed stance towards the biggest banks while legacy charges for mis-selling and rate-rigging continue to filter through.

For Mr Gulliver, the half-year results will provide an early opportunity to demonstrate that HSBC is delivering on the pledges he made at a strategy update last month.

It may confirm the sale of its Brazilian operations to Bradesco for a price in the region of $4bn (£2.6bn), part of a move expected to pave the way for a reduction in its workforce by 50,000 within three years.

Analysts expect HSBC to report a 1% increase in pre-tax profits to $12.5bn (£8bn), while revenues are forecast to rise modestly to $31.3bn (£20bn).

People close to HSBC said it was unlikely to provide a material update on the review of its headquarters, which could lead to it quitting the UK after nearly a quarter of a century.

Last week, Sky News revealed that the bank was facing a dilemma about a potential move to Hong Kong, because of the implications for its membership of the FTSE-100 share index.

Under FTSE Group rules, companies which are listed on an overseas stock market in the same country as they are domiciled are not eligible for inclusion in its equity indices.

HSBC said in April that it would undertake the domicile review amid growing concern about the impact of tax and regulatory changes on its operations.

George Osborne announced in his Budget this month that the Bank Levy, which has hit HSBC punitively since it was introduced four years ago, would be restructured.

While HSBC's bill from the Levy will reduce over time, the impact on its overall tax burden remains unclear because of a new Corporation Tax surcharge that the Chancellor has also decided to implement.

A spokesman for the bank declined to comment on Sunday.