HSBC issued a full-page Sunday newspaper apology for its shady practices, but the apology was hardly convincing. The tone of the executive letter fell somewhere on the spectrum between unrepentant and defiant, and the aggressive stance will come back to bite the bank the moment that more recent evidence comes to light. We might not have to wait long for that to happen, as Swiss law enforcement spent the day Wednesday inside HSBC’s Geneva office collecting records related to specific transactions.
Tax authorities in the United States, United Kingdom, and elsewhere are pursuing other threads in the case. Meanwhile, the scandal continues to spread with compelling links to high-profile big-money problems in Brazil, Russia, and Mexico. One London newspaper counts ten separate investigations launched since last week. Another, the Telegraph, has lost a prominent writer, who quit in response to its publishers’ ongoing role in the coverup. The paper’s statement in defense of its non-coverage is more aggressive than that of the bank itself, if that is possible, and has been ridiculed as a conspiracy theory and as having possibly been written by the bank’s PR department. Adding to the sense of scandal, two of the newspaper’s owners are said to have received an unusually large and seemingly irregular loan from the bank in the days before the non-coverage decision was sent down. Officials elsewhere, from the British prime minister to U.S. prosecutors, have been forced to join the chorus of denial, claiming they did not know basic facts of the case that were in documents they seemingly had possession of.
Greece formally applied for a six-month extension of its bailout. The plan met resistance from Germany, which wanted a deal for three years or longer. Some commentators thought the situation would set up a Greek exit from the euro, while others expected Wall Street to come to the rescue. There was some deposit flight from banks with worry about solvency if there were any delay in the government’s debt payments. The deal that is expected to be finalized this weekend is a four-month extension with Greece following the general outline of its austerity regime. This must be a disappointment to the new government in Greece, but it buys possibly enough time to get its house in order.
Royal Bank of Scotland might have to write down £4 billion in goodwill in connection with the spinoff of U.S.-based Citizens Bank. If so, it is a sign that RBS overpaid when it bought Citizens Bank.
Wall Street Journal says next month’s U.S. stress test results will show failing marks for Santander and Deutsche Bank, not for capital shortfalls, but for operational shortcomings. Santander failed last year’s stress test.