HSBC chief in warning over risk aversion as profits fall

HSBC has warned over the dangers of “unwarranted risk aversion” as bankers seek to protect themselves following the recent wave of industry scandals.

The bank’s chairman, Douglas Flint, said he fears that such behaviour in decision-making could have the result of restricting access to the financial system.

His comments came as the bank announced a 12 per cent drop in half-year profits to $12.3bn (£7.3bn), impacted by lower financial market volumes.

Hide Ad
Hide Ad

Mr Flint said: “Greater focus on conduct and financial crime risks at all levels of the firm globally is clearly the right response to past shortcomings.

“There is, however, an observable and growing danger of disproportionate risk aversion creeping into decision-making in our businesses as individuals, facing uncertainty as to what may be criticised with hindsight and perceiving a zero tolerance of error, seek to protect themselves and the firm from future censure.

“We can address this behaviour through training and leadership, but we also need clarity from public policy and regulatory bodies over their expectations in this regard.”

Mr Flint said the cumulative workload arising from regulatory reform was “hugely consumptive of resources that would otherwise be customer-facing”.

Hide Ad
Hide Ad

He highlighted its requirement to perform multiple stress tests, as well as the impact of the UK’s ongoing competition review and moves towards the establishment of a ring-fence of its risky trading activities by 2019.

The UK’s big four banks – which include HSBC – face a full-scale competition probe that could result in a shake-up of the sector and even see them broken up.

And newly confirmed rules – which will come into force in January in time for the next round of City bonuses – will mean pay-outs can be clawed back up to seven years after they are handed out.

Market Report: Business Tuesday, Page 2.

Related topics: