Threats to HSBC'S U.S. Banking License—What Will Bandar Do?

August 1, 2012 • 9:33AM

The issue of revoking the license of former Hong Kong and Shanghai Bank (now HSBC) to do banking business in the United States, was raised again July 30 by American Banker magazine. The magazine had run a feature on the spread of support for restoring the Glass-Steagall Act, on July 26.

Putting HSBC out of the United States had already been raised by Sen. Carl Levin on July 17. HSBC had to announce today that it had set aside $700 million to pay expected fines against its open laundering of drug money and money for terrorists through its U.S. and Caymans branches, exposed by Levin's Senate Permanent Investigations Subcommittee. HSBC also set aside $1.3 billion to pay fines in the UK — in that case for fraudulent "mis-selling" of interest rate and other derivatives.

American Banker put a "Let's invite HSBC to leave the U.S." commentary by a mutual fund manager named Andrew Kahr, on its "Washington Regulatory Update" page. Kahr notes that he is "not the first" to demand that HSBC lose its banking license in the United States.

"HSBC isn't needed here and has nothing to offer other than unique gigantism as a scofflaw," he writes. "The Fed should require HSBC to divest promptly all remaining U.S. subsidiaries and operations. If 'London' retaliates by excluding a U.S. bank, we can hope they'll choose to evict JPMorgan Chase's chief investment office — seemingly sited there to enjoy (I can't say profit from!) regulation even laxer than ours."

Senate Permanent Investigations Subcommittee chair Levin raised the question in July 18 hearings, of whether U.S. authorities should cancel the charter for HSBC's U.S. affiliate. Federal regulators should consider pulling the charter for a bank which has so actively circumvented U.S. laws, the Senator argued in his opening statement. And he came back to that threat after HSBC Chief Legal Officer Stuart Levey repeately implied in his testimony that the bank would hide behind Cayman Islands banking secrecy to protect it from U.S. law.

If HSBC does lose it's U.S. banking license, the Saudi intelligence/terror operations associated with new intelligence chief Prince Bandar may be discomfited. When Washington, D.C.'s Riggs Bank was forced to close a decade ago, after paying huge fines for hiding kickback schemes of Bandar, and Agosto Pinochet, HSBC took over all the Saudi Embassy's and Saudi government's accounts in the United States, and a special correspondence relationship with a dubious Saudi bank involved. Where would Bandar's black-operations slush funds park themselves without HSBC?