Why investors don't care about the HSBC money laundering scandal

Not a massive deal.

HSBC are going to be fined up to $1bn for poor anti-money laundering controls in Mexico, which made it a conduit for "drug kingpins and rogue nations", according to a US Senate committee. Finding that a bank has lax checks on money laundering is nothing new - it happened recently at Coutts, but this time the revelation  “almost puts Barclays in the shade”, writes Nils Pratley at the Guardian.

Well, hardly.

Since the HSBC scandal emerged last week (in an internal memo), shares in HSBC have only dropped 3 per cent – compare this to the 17 per cent fall in Barclays shares since the fine was announced.

Although HSBC’s fine is certain to outweigh Barclays’, the markets have remained fairly unbothered for a few reasons.

First, HSBC’s misdeeds are somewhat overshadowed by the Libor scandal, and second, as detailed in the 340-page US Senate report, the news comes amid that of similar failures  by other banks.

“The senate chose to release HSBC [‘s fine] as a case study - Lloyds and Barclays have also been prosecuted and fined”, says Sandy Chen at Cenkos. He says that Lloyds was fined back in 2009, and Barclays in 2010, but the figures haven’t yet been released.

HSBC investors will also be reassured by the fact that the current HSBC chief Stuart Gulliver was not involved in the Mexican fiasco, where as Bob Diamond was very much at the scene of the Barclays Libor fixings.

Lastly, HSBC can put the problem to bed by simply paying the fine and complying with regulators, an option Barclays doesn’t have. Here’s Sandy Chen in a note:

“Because HSBC has cooperated with the US Senate investigation, and because it has begun to implement the recommended changes, we think that US legislators and regulators will be inclined to give HSBC some breathing space.”

HSBC. Photograph, Getty Images
Photo: Getty
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The government needs more on airports than just Chris Grayling's hunch

This disastrous plan to expand Heathrow will fail, vows Tom Brake. 

I ought to stop being surprised by Theresa May’s decision making. After all, in her short time as Prime Minister she has made a series of terrible decisions. First, we had Chief Buffoon, Boris Johnson appointed as Foreign Secretary to represent the United Kingdom around the world. Then May, announced full steam ahead with the most extreme version of Brexit, causing mass economic uncertainty before we’ve even begun negotiations with the EU. And now we have the announcement that expansion of Heathrow Airport, in the form of a third runway, will go ahead: a colossally expensive, environmentally disastrous, and ill-advised decision.

In the House of Commons on Tuesday, I asked Transport Secretary Chris Grayling why the government is “disregarding widespread hostility and bulldozing through a third runway, which will inflict crippling noise, significant climate change effects, health-damaging air pollution and catastrophic congestion on a million Londoners.” His response was nothing more than “because we don’t believe it’s going to do those things.”

I find this astonishing. It appears that the government is proceeding with a multi-billion pound project with Grayling’s beliefs as evidence. Why does the government believe that a country of our size should focus on one major airport in an already overcrowded South East? Germany has multiple major airports, Spain three, the French, Italians, and Japanese have at least two. And I find it astonishing that the government is paying such little heed to our legal and moral environmental obligations.

One of my first acts as an MP nineteen years ago was to set out the Liberal Democrat opposition to the expansion of Heathrow or any airport in southeast England. The United Kingdom has a huge imbalance between the London and the South East, and the rest of the country. This imbalance is a serious issue which our government must get to work remedying. Unfortunately, the expansion of Heathrow does just the opposite - it further concentrates government spending and private investment on this overcrowded corner of the country.

Transport for London estimates that to make the necessary upgrades to transport links around Heathrow will be £10-£20 billion pounds. Heathrow airport is reportedly willing to pay only £1billion of those costs. Without upgrades to the Tube and rail links, the impact on London’s already clogged roads will be substantial. Any diversion of investment from improving TfL’s wider network to lines serving Heathrow would be catastrophic for the capital. And it will not be welcomed by Londoners who already face a daily ordeal of crowded tubes and traffic-delayed buses. In the unlikely event that the government agrees to fund this shortfall, this would be salt in the wound for the South-West, the North, and other parts of the country already deprived of funding for improved rail and road links.

Increased congestion in the capital will not only raise the collective blood pressure of Londoners, but will have severe detrimental effects on our already dire levels of air pollution. During each of the last ten years, air pollution levels have been breached at multiple sites around Heathrow. While a large proportion of this air pollution is caused by surface transport serving Heathrow, a third more planes arriving and departing adds yet more particulates to the air. Even without expansion, it is imperative that we work out how to clean this toxic air. Barrelling ahead without doing so is irresponsible, doing nothing but harm our planet and shorten the lives of those living in west London.

We need an innovative, forward-looking strategy. We need to make transferring to a train to Cardiff after a flight from Dubai as straightforward and simple as transferring to another flight is now. We need to invest in better rail links so travelling by train to the centre of Glasgow or Edinburgh is quicker than flying. Expanding Heathrow means missing our climate change targets is a certainty; it makes life a misery for those who live around the airport and it diverts precious Government spending from other more worthy projects.

The Prime Minister would be wise to heed her own advice to the 2008 government and “recognise widespread hostility to Heathrow expansion.” The decision to build a third runway at Heathrow is the wrong one and if she refuses to U-turn she will soon discover the true extent of the opposition to these plans.

Tom Brake is the Liberal Democrat MP for Carshalton & Wallington.