One can see a repeat of behaviour on the part of banks. The US Financial Crisis Inquiry Commission (FCIC), for example, stated: “we clearly believe the crisis was a result of human mistakes, misjudgements, and misdeeds that resulted in systemic failures for which our nation has paid dearly”.
When the misdeeds get detected, outright denials are first made as a matter of routine. Similarly, when responsibilities get pinned down, the buck gets passed on. And when everything fails, apologies are issued with a promise that systems would be put in place so that this doesn’t happen again. It is common pattern. It was seen when the USD$7 billionSociete Generale scandal broke, or when the recent USD$2 billion Adoboli scandal came to light. Someone down the line is made a scapegoat. Nick Leeson, who brought the century-old Barings Bank down, wrote: “I completely recognise my fault in what happened, but it was clear Barings were incompetent, and their lack of oversight was appalling”.
In the case of HSBC, the difference is that it is not oversight or incompetence, but wilful negligence.
What were the regulators doing?
As found by the FCIC, once again regulators were sleeping at the wheel.
What do we need to do?
The actions of HSBC are beyond negligent. The bank appears to be knowingly involved in assisting MLTF activities. One would expect that criminal proceedings be brought against HSBC board and CEO, with whom the buck stops. In the early 1990s, the Bank of Credit and Commerce International, started by a Pakistani financier, was found guilty of involvement in money laundering activities and was closed down.
Simultaneously, the US authorities need to take the regulators to task.
Could we expect the authorities to show the required responsibility? Or do we expect a repeat of the Indian epic Mahabharata (400 BCE) where the Druapadi, the princess, was disrobed in public eye and the King and the court were sitting with blindfolds over their eyes?
In his book, The Difficulty of Being Good: The Subtle Art of Dharma, Gurcharan Das writes: “there will always be nasty types – Shakuni, Duryodhana, Duhshasana — but good institutions are designed to punish them and to reward decent behaviour”.
It remains to be seen if this hope is rooted in reality.
This article was first published at The Conversation.
