HSBC is not having a good decade. First there was the 2012 money laundering prosecution and penalty. Then one of their directors, Rona Fairhead, was grilled by MPs when she took up the post of BBC Chair. Then it was announced that all eighty-nine HSBC directors are to be sued for their role in the laundering débâcle. And just when you might think that HSBC and its directors should show a little humility and regret, two of those directors announced that they are resigning – because the UK’s banking supervisor and financial regulator are proposing bringing in new rules to “aimed at improving individual responsibility and accountability in the banking sector”.
I am sorry to say that Mr Thomson and Mr Trueman – the directors in question – get No Sympathy At All from me. I am a great believer in fairness: I battle against money laundering because it is not fair that criminals should profit from the misery of others. I decry tax evaders because fairness demands that we all contribute to the general pot at a level that is equally palatable/painful to each of us. And I think that if you take the prestige and – let’s be honest – the significant moolah that comes with being the director of a large bank, it is only fair that you take on the responsibility for which you are being handsomely rewarded.
Going back to basics, a director is legally responsible for running the company. So when things go wrong, the director should be questioned closely. In recent years, fines levied on financial institutions for AML failings have been climbing steadily but – as I have commented before – such fines seem to hurt the shareholders more than anyone, and certainly don’t delve into the wallets of the directors. And so time is ripe for this latest consultation from the UK’s Prudential Regulation Authority and Financial Conduct Authority. It’s well worth reading in full, but to summarise, the consultation proposes (among other things) introducing a new Senior Managers Regime, which will “clarify the lines of responsibility at the top of banks, enhance the regulators’ ability to hold senior individuals in banks to account and require banks to regularly vet their senior managers for fitness and propriety”. The intention is to introduce the new rules in early 2015, and suppose we will learn between now and then which banking directors have been earning their money and so feel confident that they can pass muster under the new regime, and which have been time-serving and know now that the gig is up.
And my opinion is shared by no less a personage than Bank of England governor Mark Carney, who last night told an audience in Washington (DC, not Tyne and Wear) that “if you are the chairman or the head of the risk committee, you have a responsibility for the activities of that institution; if you don’t think you can do it, you shouldn’t be on the board”.