HSBC CEO Stuart Gulliver today defended the personal finance choices he made since he joined HSBC 35 years’ ago, as he gave evidence over the lender’s Swiss bank account scandal today.
HSBC chairman Douglas Flint waded in several times in defend Gulliver against a panel of British politicians who were trying to wrap their heads around why Gulliver sheltered £5 million of his own money at a Panamanian company with Swiss HSBC account.
Both Gulliver and Flint were in Westminster to give evidence to the Treasury Select Committee over the tax evasion and money laundering scandal. The panel is looking into whistleblower Herve Falciani’s leak of thousands of Swiss bank accounts to a range of European authorities. Gulliver’s historic Swiss bank account was one of those exposed by Falciani.
“It’s strange to look back.”
“I can understand why [the Panamanian company and Swiss bank account] tax arrangement, looks strange to you and to the wider public,” said Gulliver. “I went to state school in Plymouth, I understand it’s strange to look back.”
Born in Derby, Gulliver lived in Hong Kong from 1980, when he joined HSBC, until 2003. He moved back to Britain when he became the co-head the HSBC’s Global corporate, investment banking and markets division along with John Studzinski. Since then, he has risen up the ranks of HSBC to now being the bank’s group CEO.
He officially is a registered non-domicile person in the UK, despite now living in London, because of his lengthy residence in Hong Kong.
“I moved to Hong Kong, my life was in Hong Kong. I am a Hong Kong domiciled person. At the time, I used the structure to purely give me privacy within my own company. There was no tax purpose or tax advantage whotsoever. My compensation was not a matter for public record. However, when I became a director in 2009, I wound that structure down. I pay full UK tax on my worldwide earnings.”
The reason Gulliver placed £5 million into the Swiss bank account via a Panamanian holding company is because he wanted to hide how much he earned from his colleagues. At HSBC, in the 1990s, traders were able to look up their colleagues bank account details via in the in-house computer system.
“I understand why this looks puzzling to people but I have paid UK tax on my HSBC dividends, capital gains tax and any assets I have in the UK,” said Gulliver.
Flint also made it clear that Gulliver had, in fact, volunteered, when he became the Global Banking and Markets CEO, that he would pay UK tax.
“When Stuart [Gulliver] was living in the UK when he became the CEO of global banking and markets, he quite openly agreed and volunteered, to be fully taxable in the UK (despite being a non-dom),” said Flint.
Herve Falciani handed over 100,000 HSBC client accounts to French authorities in 2008. In total, the accounts are worth £78 billion in assets. Since then, France, Spain and the UK have recovered over £500 million in tax from the data.
Today’s Treasury Select Committee hearing was aimed at politicians gathering evidence about how HSBC potentially helped clients evade or avoid tax.
“I want to put this on the record. I want to make an apology for the unacceptable events that took place in mid 2000s. We very much regret [the actions that took place in the Swiss unit],” said Gulliver. “There were lack of controls and practices [at the time] and judged with the benefit of hindsight, [there were practices] that we wouldn’t have been comfortable with today.”
Britain’s Treasury Select Committee is manned by 13 members of parliament from across the main political parties- Conservative, Labour, Liberal Democrat and Scottish National. It is chaired by Conservative MP Andrew Tyrie, who is counted as one of the UK’s most influential politicians, after he led the Parliamentary Commission on Banking Standards (PCBS).
The was responsible for bringing about a major shake-up to the British banking industry by pushing the government to change banker remuneration rules and Libor submission changes.
The Treasury Select Committee is appointed by the House of Commons but it chooses its own subjects of inquiry.
“If you look at the problems we had with Mexico or now, it was during different times. They were all during the mid-2000s,” said Gulliver. “We have put systems and controls in place to reduce these issues. If you look at my track record we’ve [Flint] massively restructured the bank, we’ve reduced headcount, we have stopped operating like a federal structure and now more unified. We’ve reduced the number of countries we are in from 150 to around 38.”
Flint mainly answered questions from politicians over how he handled the Swiss bank account data stolen by Falciani in 2008.
Flint said the first thing the bank did was to assess how the data was extracted as HSBC’s systems “clearly and fundamentally failed.”
He revealed that while the Swiss private banking arms was now 70% smaller, around 30% of the relationship managers from between 2005 and 2007 were still working at the bank.
“Those that have stayed have been vetted, screened and managed, in adopting our policies.”
However, in reaction to outrage from Labour MP John Mann over his use of the word “stolen” regarding Falciani’s whistleblower data theft, he said “I don’t think it’s a good thing. We should not have a system that relies on theft [when it comes to transparency over potential criminal activity.”
“The last time I got a bonus was in 2010”
Flint also hit back at politicians who asked whether he would keep his bonus this year.
“The last time I got a bonus was in 2010,” said Flint without directly answering the question. “My bonuses are not linked to performance of the firm as that would be a conflict of interest.”
So, what’s next for HSBC?
It looked like Flint and Gulliver could be brought back into Westminster.
“You know, the UK public expects atonement for HSBC’s crimes. Do you agree in personal accountability and responsibility,” said one politician.
“Totally,” replied Flint.
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