HSBC’s chairman has warned of a “growing danger” that employees were becoming increasingly risk-averse because they feared being censured by regulators, as the bank reported a 12 per cent drop in first-half pre-tax profits, according to FTAdviser sister title FastFT.
Douglas Flint said there was “an observable and growing danger of disproportionate risk aversion creeping into decision-making in our businesses as individuals, facing uncertainty as to what may be criticised with hindsight and perceiving a zero tolerance of error, seek to protect themselves and the firm from future censure”, reports the FT’s Martin Arnold.
Giving the example of wealth management products, which face the risk of mis-selling allegations, Mr Flint said: “Mostly what we are talking about are credit and market risks, which are the bread and butter of banking.”
HSBC embarked on a strategy two years ago of withdrawing from several countries and activities that it considered too risky after paying almost $2bn in fines to US authorities over a money laundering scandal in its Mexican operations.
On Monday, the bank blamed the impact of disposals and an investment banking slowdown for eroding revenues and higher spending on compliance and risk-management for pushing up costs.
Shares in HSBC have fallen more than 16 per cent in the past year, as investors worry that it is struggling to grow in the face of pressure from regulators and a slowdown in emerging market economies.
After initially falling in response to Monday’s results, HSBC has moved up steadily as investors digest executives’ comments on the business. At the time of writing, the bank’s shares were up 2.7 per cent at 646p.
Earlier, the bank had reported a slump in pre-tax profit of 12 per cent in the first half of the year to $12.3bn, below expectations and sending the bank’s shares dipping.
Looking across the group, pre-tax profit fell by nearly 15 per cent in Asia, while earnings in its investment banking business, known as global banking and markets, declined by 12 per cent, to just over $5bn.
HSBC said it added $194m to its provision for mis-selling so-called payment protection insurance during the period.
