Douglas Flint has faced a number of calls for his resignation during his six years as chairman of HSBC. At last week’s annual shareholders’ meeting – his last – he was even asked whether he should be spending his retirement in jail.
But the 61-year-old, who has been on the board of the bank for 22 years, reckons he has faced far more difficult moments than a few question marks over whether he was doing a decent job. The worst, he says, was not the financial crisis of 2008, when he was the bank’s finance chief, but the record-breaking £1.2bn fine slapped on the bank for facilitating money laundering in 2012 and the deferred prosecution agreement (DPA) with the US department of justice that accompanied it.
It was a jaw-dropping, reputation-shredding time for the bank, especially the revelations that its Mexican branches had taken vast cash deposits from local drug barons, even making the tellers’ windows bigger so they were wide enough to accept their boxes of money.
Without that DPA – which former chancellor George Osborne helped to secure – HSBC, which is valued at £132bn on the stock market, could have lost its licence to operate in the US, with repercussions that could have threatened the bank’s future. “The most challenging period was dealing with the DPA and consequences of that,” recalls Flint now.
Those consequences included accepting a “monitor” – US lawyer Michael Cherkasky was installed to make sure HSBC doesn’t slip back into bad ways and he has yet to finish his work, nearly five years later. It has meant a “huge investment in enhancing our standards”, says Flint. “Having that additional scrutiny is certainly quite consuming, all consuming.”
But the DPA marked only the beginning of HSBC’s reputational crisis. Revelations by the Guardian about the bank’s Swiss arm’s industrial-scale efforts to help clients evade tax culminated in the discovery that chief executive Stuart Gulliver had been paid through Panama. Then came the bank’s links to the law firm Mossack Fonseca in the Panama Papers, and accusations of Russian money laundering quickly followed.
In his corner office on the 42nd floor of HSBC’s headquarters in Canary Wharf, east London, the chairman’s desk is strewn with paper while books are stacked around the room.
“We got through the banking crisis relatively well,” says Flint. “One has to be honest and say all banks benefited from the actions taken by public authorities to help those that were not in good shape, otherwise it would have filtered though to everyone else.”
HSBC got through the crisis without needing an injection of taxpayers’ cash. Instead, shareholders stepped in, backing a record-breaking £12.5bn cash call in 2009.
Many bank directors were cleared out after the crisis, but Flint has survived. Shareholder lobby group Manifest reckons only four other directors in the entire FTSE 100 have held a boardroom role for longer. He is now a regular on the international conference speakers circuit, sharing the stage with central bankers and politicians.
He was there during the bank’s global “dash for growth” – when it bought US subprime lender Household in 2002 and the private bank Republic New York in 1999. And he was still there when those deals unravelled, and for all the scandals that followed.
But he insists he was right to ignore the calls to resign.
The members of the board took what he calls “personal collective responsibility”, he says, adding: “I know that’s nuanced thing. Of course if you’re in a leadership position you bear some responsibility, but as part of a team.”
Since 1995, when Flint arrived, the bank’s balance sheet has ballooned from £226bn – around one-third of the size of the UK economy at the time – to £1.8tn, around the same size as the current UK economy (though that is in part because of changes to accounting rules).
That behemothic scale has provided ammunition for those that believe HSBC is too big to manage, too big to fail and too big to jail.
Flint obviously disagrees: “We’ve got a very good management team. You can be large as long as you’ve got a well articulated business model”.
As for jail, Flint reckons there is no evidence that business people escaped justice: “I don’t think anyone is above the law but people in business shouldn’t be subject to different standards of proof than ordinary citizens.”
He says efforts are now under way to make the financial system cleaner. Rather than report unusual transactions that might indicate money laundering, for instance, the banks are now expected to root them out. “Public expectations have changed in terms of policing of the financial system,” he says. “What we have today is right.”
He likens it to the debate raging about controversial images posted on social media, which platforms such as Facebook insist are not their responsibility. “That would have been kind of where we were 25 years ago. It will be interesting to see whether public policy changes.”
Flint
’s successor is former Prudential boss Mark Tucker. He takes over on 1 October and will be the first outsider to ever chair the 152-year-old bank.
Tucker will then have to find a new chief executive – because Gulliver has made clear he is also ready to go – and steer the bank through Brexit.
HSBC has already announced it is moving 1,000 roles to Paris as part of its preparations for a “hard” Brexit, but this is only one of the things on Tucker’s list: the wider European situation, free trade, the relationship between China and the US.
But Flint reckons London will survive as a financial centre, come what may. “We’re an industry that is used to change. The industry will reconfigure, London will reconfigure. The talent pool that is here, the ecosystem that exists of lawyers, accountants, trustees, the insurance market, brokers, every kind of financial sector player , the technology sector, legal system, the infrastructure and Greenwich mean time means that it’s an attractive place to run any business.”
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