Name ID Number

Abdullah Al Masud ID: 516 22 038

Sk. Salma Sultana ID: 516 22 039
Md. Farukuzzaman ID: 516 22 040
Chowdhury Golam ID: 516 22 032
Jilani
 Case Study: 5.4 HSBC
HSBC at a glance
Establishment: Founded 1865 inBirmingham,Great Britain
Headquarters: London,United Kingdom
Products: Financial services
Number of employees: 85,000 (including itssubsidiaries)
Parent: HSBC Holdings plc

HSBC Group serves customers worldwide from around 6,900

offices in over 80 countries and territories in Europe, the
Asia-Pacific region, North and Latin America, and the Middle
East and North Africa. With assets of US$2,721bn at 30
September 2012, HSBC is one of the worlds largest banking
and financial services organizations.
HSBC at a glance
 HSBC at a glance

Founded1865 inBirmingham,Great Britain

HeadquartersLondon,United Kingdom
Key people Jonathan Symonds (Chairman)
Antnio Simes (CEO)
ProductsFinancial services
Number of employees 85,000 (including itssubsidiaries)
Parent HSBC Holdings plc
 Identified problems from the Case

1. Getting into sub-prime mortgage

business
During 2003-2008, HSBC acquired the US Subprime
lender, Household Finance Corporation for $14.6 bn and
named HSBC Finance Corporation.
The acquisition finally led losses of $50.00bn.
HSBC wrote off $10.6bn of good will relating to its North
American acquisition.
2. Scandals of Payment Protection
Insurance (PPI)
In the UK market, HSBC embroiled in the scandals of
Payment Protection Insurance (PPI) by mis selling of
derivatives to small business.
 Problems
Identified problems from the Case

3. Manipulation of LIBOR
HSBC along withits market peers like Barclays, UBS
AG,Bank of America NAandCitigroup Inc. improperly
influenced the Libor to falsely inflating or deflating their
rates so as
Founded1865 to profit from
inBirmingham,Great trades, or to give the
Britain
impression that they were
HeadquartersLondon,United Kingdommore creditworthy than they
Key people Jonathan Symonds (Chairman)
were.
Antnio Simes (CEO)
4.ProductsFinancial
Breaching Compliance & Lack of Due
services
Number of employees 85,000 (including itssubsidiaries)
Diligence
Parent HSBC Holdings plc
HSBC conducted compliance breaches in USA: Money
Laundering & Sanction violation for which they were
ordered in both 2003 and 2010 by U.S. regulators to
strengthen its anti-money laundering practices for which
they made provision of $1.5Bn in 2012.
HSBC failed to monitor $60 trillion in wire transfer and
account activity;
 HSBC: Way out/Solution
Action taken by HSBC

1. Losses incurred from sub-prime

mortgage business
HSBC had profited from continuing growth in Asia,
where it generates about 65 percent of its pretax
profit.
It shed over 6,000 employees, close over a
thousand branches worldwide, and write off
$10.6bn of good will for its mortgage generating
unit in the United States.
2. Scandals of Payment Protection
Insurance (PPI)
HSBC has been forced to put aside nearly 750m to
compensate customers mis-sold payment
 HSBC: Way out/Solution
Action taken by HSBC

3. Manipulation of LIBOR
For transparency and accountability, the Tender
Committee, an independent organization with
government and regulator representation now manage
the process of setting Libor under a new external
Founded1865 inBirmingham,Great Britain
oversight process.
HeadquartersLondon,United Kingdom
Banks thatJonathan
Key people makeSymonds
submissions
(Chairman)to Libor would be required
toAntnio
base Simes (CEO)
them on actual inter-bank deposit market
ProductsFinancial services
transactions and 85,000
Number of employees keep(including
records of their transactions
itssubsidiaries)
supporting those submissions.
Parent HSBC Holdings plc

4. Breaching Compliance & Lack of Due

Diligence
Improvement in Software
Changes in Human resources
Changes in credit policies
Upgrading in Compliance process
 Lesson Learned
Regulatory Framework and Supervisors
A refined regulatory framework to be placed to avoid
distorted incentives.
Supervisors and regulators need to have the
incentives and resources to look hard and deep at
possible flaws in the risk management systems of the
institutions they oversee.
Financial Sector Reform Agenda
Reform agenda must be focused on all four key pillars
of financial system stability:
Sound regulation
Effective supervision
Good governance and risk management in financial
 Lesson Learned
Reputational Risk Loss
Reputations can be difficult to control or change. At
the moment,consumers are not forgiving many of the
companies that were front and center during the
economic crisis.
Effective Financial Model
A strong financial model can properly identify the
associated risks on investments and its mitigating
factors considering the market dynamics.
Capacity Build Up
Capacity build up to absorb the risk by its size,
diversification and financial resources.
Thank you !