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In the News

HSBC may see higher fine, criminal charges

A US fine for anti-money laundering rule breaches could cost HSBC significantly more than US$1.5 billion and is likely to lead to criminal charges, Europe's biggest bank said yesterday.

HSBC said the US investigation had damaged the bank's reputation and forced it to set aside a further US$800 million to cover a potential fine for breaches in anti-money laundering controls in Mexico, adding to US$700 million put aside in July.

"It could be significantly higher," CEO Stuart Gulliver said on a conference call, saying the latest provision was based on discussions with the various US authorities involved in the probe.

The timing of any settlement is in the hands of regulators and is likely to involve the filing of corporate criminal and civil charges, the bank said.

A US Senate report in July slammed HSBC for letting clients shift potentially illicit funds from countries such as Mexico, Iran, the Cayman Islands, Saudi Arabia and Syria.

HSBC had warned earlier in the year that it could face criminal or civil charges as part of the investigation.

The London-based bank has said the issue was "shameful and embarrassing" after the report criticized a "pervasively polluted" culture at the bank and said HSBC's Mexican operations had moved US$7 billion into its US operations between 2007 and 2008.

"The report undoubtedly caused considerable reputational damage to HSBC. The extent to which that has resulted in loss of business is hard to measure, but it has undoubtedly damaged our brand," Gulliver said.

He said a number of staff had left the firm as a result of the investigation and a number had had pay clawed back.

"The money laundering provision is a concern, particularly given the uncertainty on what the final figure might be," said Richard Hunter, head of equities at stockbroker Hargreaves Lansdown.

The issue is another blow for the reputation of British banks, after rival Barclays was fined US$450 million in June for rigging Libor interest rates and the industry has had to set aside more than 12 billion pounds (US$19 billion) to compensate UK customers for mis-selling insurance products.

Gulliver said it would take time to clean up the mess.

"There's a whole series of things that came from probably a decade in the 2000 to 2008-09 period that have surfaced now that the industry needs to sort out, remediate, and make sure doesn't happen again.

"It will take a chunk of time to clean the system and then it will take a little bit longer than that for trust to be restored more fully," Gulliver said, adding that it was his job to get HSBC back to a position "where it's regarded as the best of the bunch."

Source: http://www.shanghaidaily.com/nsp/Business/2012/11/06/HSBC%2Bmay%2Bsee%2Bhigher%2Bfine%2Bcriminal%2Bcharges/

offers yuan bonds in London

Kwong Man-ki in Beijing

State-owned China Construction Bank (CCB) is planning to sell up to 2.5 billion yuan of offshore yuan-denominated bonds in London, a sign that Beijing is stepping up efforts to internationalise its currency.

The mainland's second-largest lender by market value will issue the dim sum bonds through its London unit, CCBL Funding, a statement by Fitch Ratings, which is rating the bonds, said yesterday.

All funds raised will be used to develop CCB's offshore renminbi business and for other general corporate purposes, Fitch said.
The issue, the first by a Chinese lender, is to be launched this month, a report by Dow Jones said yesterday, citing unnamed sources.

CCB declined to comment.

In April, Europe's biggest lender, HSBC, sold 2 billion yuan of dim sum bonds in London, the first such issue in the city.
Ivan Chung, vice-president and senior credit officer of project and infrastructure finance at Moody's Investors Service, said CCB's bond issue is symbolic of the mainland stepping efforts to internationalise the renminbi.

"This is a sign that the mainland hopes more yuan-denominated products will be available in different markets," he said.
If the dim sum bond was issued in Hong Kong, most of the investors would be from the mainland, Chung said.

"I think CCB didn't choose Hong Kong as it wants the yuan-denominated investment product to reach more investors."
London has ambitions to be a Western hub for yuan trading.

David Wootton, Lord Mayor of the City of London, said in Hong Kong in September that the city supported development of the offshore yuan market with Hong Kong as a partner.

Chung expects CCB's dim sum bond to receive a warm response. After the European debt crisis, some funds are looking to boost their investment in the mainland and seeking low-risk products.

Fitch said in the statement that the proposed dim sum bond issue is expected to be rated A.

Taiwan could be the next market to attract companies wanting to issue dim sum bonds, Chung said.

"Many Taiwanese enterprises are holding a significant amount of yuan deposits," he said.

He is not concerned that London or other markets will challenge Hong Kong's position as an offshore yuan centre.

"Hong Kong still has its advantages in terms of location and the city started developing the dim sum bond market much earlier than London."

A report by the City of London in April said total yuan deposits in London reached more than 109 billion, while yuan deposits in Hong Kong amounted to 545.7 billion at the end of September, according the Hong Kong Monetary Authority.

Source: http://www.scmp.com/business/banking-finance/article/1074838/ccb-offers-yuan-bonds-london

Edward Lehman 雷曼法学博士
Managing Director 董事长

LEHMAN, LEE & XU China Lawyers

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