You may have heard of banks that are "too big to fail" but how about banks that are "too big to indict"? That's the dilemma regulators faced in the case of British multinational bank HSBC Holdings.
Several outlets are reporting today about a settlement reached among HSBC and state and federal regulators in the US. The bank will pay a "record" $1.92 billion penalty after illegally laundering at least $15 billion of funds for Mexican cartels and doing illegal business with sources in Iran, Libya, Sudan, Burma and Cuba. Reports the Chicago Tribune:
The settlement is the third time in a decade that HSBC has been penalized for lax controls and ordered by U.S. authorities to better monitor suspicious transactions. Directives by regulators to improve oversight came in 2003 and again in 2010.
While the penalty is steep the bank announced last month that it was setting aside most of the needed funds in anticipation of settlement. It's stock has taken a slight dip leading some analysts to rate the stock a "buy". One analyst copped a stoic attitude about being let off the hook so easily:
"Is it absorbable? Yes. Is it significant? Yes. But in the absence of a broader attack on the business structure or individuals, that explains why the market reaction has been relatively muted today and has been since the allegations came out," he added.
You might think that aiding and abetting criminal cartels and helping to bypass international sanctions meant to combat terrorism would lead to serious charges meriting more than high profile slap on the wrist. You'd be wrong, at least in the present era when regulators are simply afraid to interfere much with banks "too big to indict." The New York Times has the story:
A money-laundering indictment, or a guilty plea over such charges, would essentially be a death sentence for the bank. Such actions could cut off the bank from certain investors like pension funds and ultimately cost it its charter to operate in the United States, officials said.
Despite the Justice Department's proposed compromise, Treasury Department officials and bank regulators at the Federal Reserve and the Office of the Comptroller of the Currency pointed to potential issues with the aggressive stance, according to the officials briefed on the matter. When approached by the Justice Department for their thoughts, the regulators cautioned about the effect on the broader economy.
So rest peacefully, your pensions are safe. Bankers around the world have been put on notice that should they continue to facilitate the operations of murderous gangs of thugs they might very well be called on the carpet where they'll have to face the mild reproval of regulators yet again.