A court in Hong Kong has levied a record fine against HSBC's Swiss arm for selling structured products linked to now-defunct investment bank Lehman Brothers in the run-up to the financial crisis.
An appeals court lowered the fine against HSBC's Swiss bank over how it sold products backed by collapsed U.S. investment bank Lehman Brothers from an original HK$605 million. The court said it still hoped to send a signal to deter others.
The amount is nevertheless a record fine for Hong Kong's overseers, which acknowledged the penalty may be viewed as «severe».
«However, in the light of all the relevant evidence – including profits made by the bank and overall losses suffered by many of its clients – it has been drawn to the conclusion that it is an appropriate penalty,» Hong Kong's Securities and Futures Appeals Tribunal wrote in a ruling on Tuesday.
Heftier French Fine
HSBC said the ruling doesn't affect its private banking activities in Hong Kong, which it operated under the auspices of its Swiss private bank until four years ago. That entity was also recently hit by a far heftier fine in France for helping tax evasion, as finews.com reported.
«HSBC private banking has stringent processes and controls which are in line with the evolving regulatory landscape, and has enhanced its investment advisory model,» the bank said in a statement.
Warning Shot
The Swiss private bank will have its Hong Kong license temporarily and partially suspended, but this is largely moot since the British bank no longer operates there under the Swiss entity.
Victims of Lehman's collapse, some of them pensioners, protested in front of a handful of banks including HSBC in 2008 after suffering losses from the products. The court made it clear its actions are a warning shot.
«Put another way, that – in future – penalties imposed for convenient avoidance of the requirements of the code of conduct will constitute something more severe than the mere 'cost of doing business',» the tribunal said.
