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HSBC has nothing to say sorry for if it did no wrong
Opinion
Jake's View
by Jake Van Der Kamp
Jake's View
by Jake Van Der Kamp

HSBC has nothing to say sorry for if it did no wrong

There is something I do not understand here. The story, as it most commonly appears, is that HSBC's people in Geneva cheated by helping clients dodge tax and HSBC now proclaims itself sorry that this happened.

There is something I do not understand here. The story, as it most commonly appears, is that HSBC's people in Geneva cheated by helping clients dodge tax and HSBC now proclaims itself sorry that this happened.

It is entirely within the law, however, to avoid taxes and it is entirely proper for banks to help their clients do so. There is nothing wrong with paying a lower tax rate by booking your income in one jurisdiction rather than another if you may legitimately do so.

The key is whether you may legitimately do it, and there are plenty of circumstances in which you may. There are also circumstances in which you may not, and if you then attempt to do so, then you are evading taxes, which is illegal.

All we have been told about these happenings in Geneva, however, is that HSBC's clients "dodged" taxes. Yes, but was that tax avoidance or tax evasion? If the first, then there is no case to make against the bankers who helped. They were doing their jobs and there is nothing shameful in this.

If your banker or financial adviser tells you, "I can save you $20,000 by making this item an interest-withholding tax rather than a profits tax and it's entirely legit", imagine yourself saying, "No, I prefer paying more tax. It's my duty to beggar myself for my president."

But let us assume that what we had in Geneva was tax evasion, which is a crime. If the bank has not pleaded guilty to this crime in a court of law, and it has not, why should it prejudice its case in any possible future legal proceedings by saying that what it did was "shameful"?

I simply cannot imagine its lawyers advising it to do anything of the kind. Why say it then? In particular, why say it if it is not true, which, if we are looking at ordinary tax avoidance, it is not.

Similarly, we have HSBC joining a general London grovel about supposed manipulation of interbank rates by quoting false offers for the London Interbank Offered Rate (Libor).

But the only way that a dealer can give anyone a false quote is by refusing to deal at the rate that he has just quoted. Do that once as a dealer and you may be forgiven. Do it again and you can look for a new job.

What actually happened is that the people who put Libor together made false market enquiries. They asked for an offer rate but they had no intention of dealing. The dealer knew it and felt free to tell them whatever he liked. They could have called his bluff by dealing at that offer, but they did not.

There was no manipulation. There were only people thinking they could get valuable market information for free and being dealt with as such people always are on a market. I see no misdeed here and no reason for apologies or fines.

In fact, I have yet to see a proven criminal case in any of the recent allegations of misdeeds by HSBC. Every time that journalists or regulators accuse it of sleaze, management tumbles over itself to say sorry. If we really have crime here, why can we not see it brought to a court of law?

Others have asked that question and concluded that we do not see it because HSBC has cowed the regulators. I think it is because the regulators have very weak cases and they know it.

HSBC's problem is it that is still a collection of smaller financial operations cobbled together under one name over the last two decades, rather than a single worldwide entity. It is not easy to keep everyone pulling together in such a bank.

This is no crime but I still have my own accusation of craven management to make against Mr Gulliver.

You're a wimp, Stuart. Stand up for your people for a change.

This article appeared in the South China Morning Post print edition as: HSBC has nothing to say sorry for if it did no wrong
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