HSBC: Trump may stick with current bank rules in place since financial crisis

HSBC Holdings Plc Chairman Douglas Flint said he doesn’t expect President-elect Donald Trump to dismantle the regulatory framework put in place since the financial crisis, and cautioned returning to a “light-touch” approach could spell disaster for the banking industry.

While there may be some relaxation of the Volcker rule, which curbs banks’ trading with their own money, lenders don’t want to go back to the pre-crisis state, Flint said in a Bloomberg Television interview. Even if the US rules soften, Europe probably wouldn’t follow, he said.

“Our biggest risk is our own industry, so you don’t want a part of the world where people are able to do things with much less capital than is economically advisable because we are all exposed to each other,” said Flint, 61. “Light-touch regulation and competing to see who can have the lowest standards is a really, really bad form of banking.”

Flint has helped guide Europe’s largest bank, with more than 235,000 employees across 71 countries, through a raft of new regulations requiring the bank to raise billions in capital and split off its retail operations from the investment bank.

As he prepares to step down after two decades at the company, HSBC has much left to contend with. The bank remains under the watch of the Department of Justice after helping South American drug cartels launder money, and faces slowing economic growth in China and the prospect of a post-Brexit recession in the UK, its two most important regions.

HSBC stock has climbed 23 per cent this year, beating all large European rivals, as its exposure to Asia and dollar-denominated earnings proved beneficial amid a drop in the pound. Still, the bank faces questions about its profitability in the new regulatory framework, as well as its ability to increase revenue faster than costs in a low growth, low interest-rate environment.