Women walk out of a branch of HSBC at Dubai Internet City in Dubai February 5, 2012.NIKHIL MONTEIRO/Reuters
Shares in HSBC Holdings PLC fell on Thursday after the Financial Times reported it could face a record $1-billion (U.S.) fine following an investigation by U.S. authorities into breakdowns in money laundering prevention.
Shares in the British bank closed the day's trading down 2.25 per cent in London as the market pondered the extent of the punishment the bank could face as part of a U.S. probe into shadowy money flows.
HSBC declined to comment on the potential level of the fine but, in its annual report in February, it had said that any fines or penalties imposed could be "significant".
The Senate panel said on Wednesday it would detail the findings of its inquiry at a hearing on July 17 entitled "Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History".
A $1-billion fine would be substantially higher than penalties handed out to ING Bank and Wachovia for offences relating to the movement of illicit funds.
"The statements in the press seem to amount to tacit acknowledgement of liability by HSBC management so we await precise terms and settlement amounts," said Investec analyst Ian Gordon. "If the number is as large as reported it's not insignificant but the market will treat it as a one-off."
In an e-mailed statement, HSBC confirmed it will testify before the Senate panel on July 17 and said it had been fully co-operating with U.S. regulatory authorities in relation to the issues.
"The board and leadership of HSBC are fully committed to implementing the highest standards and have already made significant changes to our organization's structure to bring this about," it said.
ING agreed to pay $619-million last month to settle U.S. government allegations that it violated U.S. sanctions against Cuba, Iran and other countries by allowing $1.6-billion to illegally move through banks in the United States from the early 1990s through 2007, by concealing the nature of the transactions.
In March 2010, Wachovia Bank agreed to pay $160 million to settle U.S. charges it failed to stop more than $100 million of Colombian and Mexican drug traffickers' money being laundered through accounts at the bank.
Oriel Securities analyst Mike Trippitt said a $1 billion fine would equate to just under 5 percent of HSBC's forecast 2012 pretax profit and reiterated a "reduce" recommendation on the shares.
Mr. Trippitt recommended clients switch out of HSBC into Lloyds Banking Group and Standard Chartered