HSBC hands allowances to hundreds of bankers to avoid EU bonus cap

Britain's biggest bank awards staff 'fixed pay allowances' to side-step restriction on bonuses imposed by Brussels

A defiant HSBC is handing its chief executive, Stuart Gulliver, allowances worth £32,000 a week – on top of his £1.2m salary – to get around the EU's cap on bonuses, in a move that is expected to be replicated by the other high street banks.

HSBC became the first UK bank to reveal how it will sidestep the pay restrictions imposed by Brussels, as it further fuelled the debate over City pay by also revealing that 239 of its bankers received more than £1m last year. Gulliver, the boss of Britain's biggest bank, hit out against the new rules, which restrict bonuses to 200% of salary even with shareholder approval, but the TUC accused HSBC of "soaraway boardroom greed".

The £1.7m "fixed pay allowance", paid in shares every three months on top of Gulliver's salary, will ensure he is paid a minimum of £4.2m a year, up from £2.5m now. Similar allowances, in shares that cannot be sold for five years, are being handed to 111 top bankers at HSBC, while another 554 are to be handed extra payments in cash.

The move prompted Labour to call for a repeat of its bonus tax while the Robin Hood Tax campaign said the payments bolstered its argument for a tax on financial transactions.

"HSBC haven't so much circumvented rules on bonuses as driven a coach and horses through them. The only way to rein in bankers' remuneration is to make banks pay their fair share to society," a Robin Hood Tax campaigner said.

The TUC general secretary, Frances O'Grady, said: "It would be great if banks put the same effort into lending to small businesses and investing in infrastructure as they do to getting round EU rules on boardroom bonuses."

HSBC's response to the Brussels bonus cap was contained in its annual report, which showed profits rose 9% to $22.5bn (£13.6bn) in 2013, when its bonus pool for staff rose 6% to $3.9bn.

A year ago HSBC made $20.6bn profits and paid 204 of its staff more than £1m, although its shares were among the biggest fallers in the FTSE 100 index of blue chip shares on disappointment that the profit rise was not greater.

However, the rise in bonuses at HSBC was in contrast to Barclays, which increased them by 10% even though its profits fell 32%. HSBC said its dividends to shareholders were up 11% while staff costs were down 6%. Barclays is among the banks – including the bailed-out Lloyds Banking Group and Royal Bank of Scotland – that are expected to follow HSBC by handing out allowances to top staff as they respond to the EU cap on bonuses, which affects payouts to be made this time next year.

The disclosures by HSBC came as the pay-setting committee of RBS prepared to meet to confirm the bonus pool for its 120,000 staff. The size of the pot, expected to be £500m, will be announced on Thursday, when the 81% taxpayer-owned bank is expected to report losses of £8bn.

"We don't want to do this at all," said Gulliver, whose total pay and bonuses in 2013 were £8m, up from £6.3m the previous year. He stressed his maximum potential pay each year would fall to £11.4m from £13.8m to counteract the rise in the fixed part of his pay. Gulliver, who started his career at HSBC more than 30 years ago as a currency dealer, also receives £79,000 for the use of cars in Hong Kong and accommodation there worth £229,000.

George Osborne is taking legal action against the Brussels cap and Gulliver said the bank would revert to its previous schemes if this was successful.

"We had a compensation plan here that the shareholders liked but sadly because of the EU directive we've had to change. This isn't something we would have wanted to do … It's much more complicated," Gulliver said.

The Bank of England's Andrew Bailey has warned the cap could lead to a £500m rise in fixed salary costs at the big banks and make them riskier. Andrew Tyrie, the chairman of the Treasury select committee who also chaired the parliamentary commission on banking standards, said: "A crude bonus cap does nothing to incentivise higher standards. What we need is a fundamental reform of the bonus culture including much longer deferral and much greater scope for clawback, as the banking commission proposed."

HSBC – which after a £1.2bn fine in 2012 is subject to tough restrictions imposed by the US authorities – risked further controversy over pay by revealing that its chairman, Douglas Flint, who in the past has not received bonus payments, is line for new share awards because of his role in "intense regulatory change". The move could allow Flint to receive maximum pay of £4.6m a year, up from £2.4m.

Gulliver has taken the axe to costs since being promoted to chief executive three years ago, cutting 40,000 roles and pulling out of 63 countries or businesses. The bank – one of the highest dividend payers in the FTSE 100 – said that the government's bank levy on its balance sheet had cut its dividend by $0.05 per share as it had cost $904m last year, while it had set aside another $395m for misselling payment protection insurance and products to small businesses. From the start of this year, the bank has changed the way it pays the staff in its retail division to remove the link between sales and bonuses, with a view to cutting misselling bills.

Despite the controversy over the cap, Gulliver gave a clear commitment to remaining in the UK, although the bank generates less than 10% of its profits here. Some 70% of its business is generated in Hong Kong and the Asia-Pacific region, and Gulliver said that 208 bankers in London would receive the three-monthly allowances compared with 395 outside the UK. It employs 254,000 people, 46,000 of them in the UK.

In total the bank has 1,318 employees whose bonuses must be capped under the new rules – those regarded as taking and managing risks – but just over 650 will receive no extra allowances.

In more than 600 pages of documents, the bank also gave further breakdowns of staff pay, revealing for the first time the number of staff paid more than €1m – some 330 – and that 192 bankers defined as key staff received an average pay deal of $1.5m (£900,000).

Barclays has told staff affected by the cap that they will receive the payments, called role-based allowances, each month alongside their salaries but has yet to disclose how much its chief executive, Antony Jenkins, will receive. Jenkins has turned down a potential bonus of £2.7mon top of his £1.1m salary but still stands to receive at least £4m from long-term share plans due to be released next month.

The new boss of RBS, Ross McEwan, has waived his payout. António Horta-Osório, the boss of Lloyds, is receiving a £1.7m bonus on top of his £1m salary, a £500,000 pension contribution and a payout from a long-term incentive plan that could total £2.9m – half the potential sum – when it is formally revealed next month.

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Former Barclays bankers charged over Libor allegations

The three men are the first former or existing Barclays staff named in criminal proceedings linked to interest rate fixing allegations

Three former Barclays bankers have been charged in relation to allegations of a conspiracy to manipulate Libor interest rates.

The Serious Fraud Office said the men were charged in connection with an allegation of conspiracy to defraud between 1 June 2005 and 31 August 2007.

The bank was fined £290m by US and UK regulators two years ago for a "serious, widespread" role in trying to manipulate Libor rates. There was no admission of criminal liability but the scandal ultimately led to the departure of the chief executive, Bob Diamond.

Although Barclays was the first of several banks to reach a regulatory settlement of Libor allegations, neither existing nor former employees had been named in criminal proceedings until Monday.

The focus of criminal proceedings until now has been a former Citigroupand UBS trader, Tom Hayes, who is charged with conspiracy to fix Libor with employees at eight other financial firms including Royal Bank of Scotland, JP Morgan Chase, Deutsche Bank, Icap, Tullett Prebon, Rabobank RP Martin and HSBC.

It is thought that the latest charges brought against former Barclays staff relate to a separate alleged conspiracy, unrelated to the alleged plots between August 2006 and September 2010 involving Hayes.

The three former Barclays bankers are Jonathan Mathew, who worked in the bank's treasury unit in London and left this position in September 2012, Peter Johnson, who is thought to have been a senior dollar Libor submitter in London, and Stylianos Contogoulas, a former trader at Barclays who moved to Merrill Lynch in July 2006 and left there in September 2011.

Barclays declined to comment.

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RBS risk fuelling pay row as it considers how to avoid EU bonus cap

Bank which is 81% owned by taxpayers is keen to keep pace with Barclays and HSBC, which plan to hand out 'allowances'

Royal Bank of Scotland risks fuelling the row over pay as it considers how to follow rivals that have devised ways to avoid the EU bonus cap and maintain their bankers' multimillion-pound pay cheques.

The 81%-taxpayer-owned bank is keen to keep pace with rivals such as Barclays and HSBC, which are both planning to hand out new allowances, which are not classed as salary and therefore do not get included in the calculations used in the bonus cap. They have been introduced to ensure bankers do suffer any reduction in pay as a result of the bonus cap being imposed by Brussels.

Data published by the European Banking Authority last year showed that the average banker based in London received a bonus of 370% times their salary – indicating the impact that the bonus cap would have on pay.

Labour on Wednesday blew open the debate on the bonus cap, which came into effect at the beginning of this year and which George Osborne opposes. The cap limits the bonuses of the most senior bankers to 100% of their salary, unless the bank that employs them wins specific approval from its shareholders to pay bonuses of 200%. Labour called on the government to clamp down on bonuses at the loss-making, bailed-out bank and use its 81% stake to ensure that none of the RBS bankers will get 200% bonuses.

RBS admitted on Wednesday night it was consulting shareholders about pay, but insisted no decisions had yet been made.

All the major banks are expected to ask their shareholders for permission to pay bonuses twice the size of their top bankers' salaries at their upcoming annual general meetings. They are also looking at ways to pay their staff even more by making payments in addition to their salaries.

HSBC, for instance, is ready to hand out share awards to 1,000 or so of its more senior staff alongside their salaries and annual bonuses. Barclays also intends to hand its investment bankers monthly allowances to maintain their overall level of pay.

The other bailed-out bank, Lloyds Banking Group, is also expected to seek approval to pay out bonuses of twice salaries and look at ways of maintaining pay levels by using some form of additional payment. Such a move would also require approval from UK Financial Investments, the body that controls the taxpayer's stake in the bailed-out banks and still owns 33% of the shares after selling off a tranche last year.

Vince Cable, the business secretary, called on RBS to show restraint and urged it to consider the business models used by other banks that do not pay bonuses. He cited the Swedish bank Handelsbanken, which does not pay bonuses and instead uses a profit-sharing system called Oktogonen, which pays out when individuals turn 60.

"What I would say to RBS is they need to show restraint. They are changing their overall banking strategy. Instead of being a global bank aimed at investment banking they're now thinking about being a British bank aimed at British customers and British business. They should look at other models like Handelsbanken, in Sweden, which is very successful and has branches in Britain and doesn't have any bonuses at all," Cable told ITV.

Handelsbanken's UK offshoot has been unable to make Oktogonen allocations to staff for the past three years because of a dispute with HM Revenue & Customs about whether it is disguised remuneration – pay that is not being taxed.

The business secretary insisted that the government had not yet seen any proposals from RBS about its plans to tackle the bonus cap and referred to remarks by David Cameron warning about the bonus rules leading to increases in salaries to allow staff to receive the same amount of money.

"I think that's a legitimate concern that we can take into account,' Cable said.

"Most banks will be trying to get the cap lifted to 200%," said Greg Campbell, employment partner at the law firm Mishcon de Reya. Campbell said there had already been major changes to pay, when in the past bonuses across the City might have been as large as 10 times salary.

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New London finance jobs rise for first time since early 2012

The number of new financial services jobs in London rose for the first time in almost two years last month, research showed on Monday, which recruiters said was a sign that banks are starting to think about growth after years of restructuring.

However, the number of jobs created in the whole of 2013 fell 21 percent compared with the year before as the financial jobs market still struggles to recover from the effects of the financial crisis, after which a number of banks cut jobs or pulled back from certain activities to reduce costs.

In December, 1,340 new jobs were created in the City financial district, up by two thirds versus the same month in 2012, according to research by recruitment firm Astbury Marsden. It was the first time in 22 months there had been a year-on-year monthly increase, the study said.

Investment banks created 67 percent more jobs than in December 2012.

Astbury Marsden said steady trading volumes encouraged City firms to continue to support growth in equity and derivatives trading and a buoyant shares listings market encouraged banks to devote more resources to deal-making and execution teams.

The total number of roles created in 2013 fell to 27,915 from 35,115 created in 2012, the research showed.

Astbury Marsden said there were some positives to be taken from the fact that the rate of shrinkage had slowed, however, as total new roles in 2012 had been 35 percent behind 2011.

"What we are seeing is very far from a return to aggressive hiring, but it is a good sign that banks are thinking again about growth," Astbury Marsden's Chief Operating Officer Mark Cameron said.

Separate research released last week suggested financial services institutions are finding it increasingly difficult to find the right staff to fill roles and to keep top talent on board.

TALENT BATTLE

In a survey conducted as part of recruitment firm Robert Half's Salary Guide for 2014, almost all of the 100 executives asked said it was a challenge to find skilled financial services professionals and 95 percent said they were concerned about losing top performers.

A similar number said they were worried about losing top talent to international competitors as a result of the European Union bonus cap, which limits bonuses to no more than annual salary, or twice that with shareholder approval.

Bonuses and executive compensation are particularly thorny issues in Britain, where many believe high levels of pay encouraged the excessive risk taking that led to the financial crisis.

People struggling in the economic downturn have been infuriated by companies, particularly banks rescued by the government at the height of the crisis, which continue to award payouts many times the average wage.

Robert Half said almost two thirds of firms surveyed had already raised salaries by an average of 19 percent for top employees to counteract the crimp on bonuses, while six in 10 have also increased benefits for affected staff.

In November Barclays (BARC.L) unveiled a plan to give senior bankers additional monthly payments and last week an industry source said HSBC (HSBA.L) is considering handing out new share awards to around 1,000 top-ranking staff.

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Banks braced for huge EU fines over Libor rate-rigging scandal

UK's RBS believed to be among at least six banks facing record fines for manipulating European and Asian interest rates

The interest rate-rigging scandal that has damaged the reputation of the banking sector looks likely to be reignited as Brussels is expected to impose multimillion-pound fines on a number of major firms for manipulating crucial benchmarks.

The action by Joaquín Almunia, the EU competition commissioner, will pile further pressure on Royal Bank of Scotland, the bailed-out bank already dealing with the fallout from a major systems meltdownthat left millions of customers without access to cash and allegations – which it denies – of mistreating its small business customers.

The 81% taxpayer-owned bank is reported to be among at least six major players in the financial markets, including Deutsche Bank in Germany and Citigroup in the US, caught up in the cartel investigation. The EU is said to be ready to impose record-breaking fines for alleged collusion for rigging key benchmark rates.

Brussels is thought to have focused on yen Libor, based on Japanese interest rates and priced out of London; Euribor, the Brussels equivalent to Libor; and the Tokyo rate known as Tibor. Almunia has been in discussions with banks for weeks and the resulting penalty is expected to surpass the record €1.5bn (£1.24bn) imposed on a cartel.

Each cartel could face combined fines of as much as €800m, although it was unclear on Tuesday nightwhat the exact penalties would be and how the sums would be divided. Penaltiesfor breaches of antitrust rules can theoretically be as much as 10% of turnover.

The fines are the latest to be levied on banks and financial firms for manipulating key benchmark rates. Five firms have already been fined by market regulators on both sides of Atlantic in an ongoing investigation into the manpulation of the rates, used to set interest rates on loans granted around the world.

Barclays was fined £290m in June 2012 in a move that led to the resignation of its chairman, Sir Marcus Agius, chief executive, Bob Diamond, and other senior managers. Other banks who have since been fined by US or UK regulators RBS, UBS of Switzerland and the Dutch bank Rabobank. The money broker Icap has also been fined and the FCA's investigations are ongoing.

The Libor investigation has sparked interest in a number of other benchmarks used to price financial products, particularly the foreign exchange markets, which are now being investigated by a number of regulators around the world, including the UK's Financial Conduct Authority.

Reuters reported that UBS had alerted the European Commission to the yen interest rate manipulation and would not be penalised. The Financial Times said Barclays would avoid a fine for Euribor rigging for similar reasons.

Between six and ten banks are reported to befacing fines, including Citigroup, which would be the first US bank to become embroiled in such high-profile penalties for manipulation of key rates.

Deutsche Bank and RBS will be penalised for rigging the benchmark eurozone interest rates known as Euribor. French bank Société Générale is also part of the group facing sanctions for alleged Euribor rigging, according to Reuters.

The news agency said HSBC and the French bank Crédit Agricole had not reached a settlement, while the FT said the US bank JPMorgan had also failed to do. They may face fines later.

Reuters said Barclays, Deutsche Bank, Société Générale, RBS, JPMorgan and Citigroup declined to comment and HSBC and Crédit Agricole were not immediately available to comment.

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Bank of England governor reiterates pledge on low interest rates

Mark Carney leaves door open for fresh stimulus measures if Britain's 'fledgling recovery' is threatened - but sterling rises against the dollar and 10-year gilts rise after the speech

Mark Carney, the governor of the Bank of England, sought to convince a sceptical City that borrowing costs will remain on hold for the next three years on Wednesday, as he warned that Britain needs a prolonged period of low interest rates to make up the ground lost during the recession.

In his first big speech since taking charge in July, Carney left the door open for fresh stimulus measures if adverse market reaction to the Bank's new forward guidance regime threatened the UK's "fledgling recovery".

The governor said he was trying to provide certainty to businesses and households that the recent signs of growth would not be followed swiftly by a tightening of policy.

"We have a recovery that's just beginning. It's a very long way back. We are lagging just about everybody else in the advanced world. There's a lot of spare capacity", Carney said in a press conference following his speech to business leaders in Nottingham.

The City was left unimpressed by the renewed commitment to leave interest rates at their record low of 0.5% and to maintain the level of assets purchased under the Bank's quantitative easing programme at £375bn. Sterling jumped by half a cent against the dollar after he spoke, while yields on 10 year gilts rose from 2.73% before his speech, to 2.8% afterwards – the opposite direction to the move Carney might have hoped for.

Traders believe that the pick-up in economic activity will strengthen over the coming months and that the unemployment rate will fall to 7% – the threshold at which Carney might raise interest rates - well before the 2016 date pencilled in by the Bank.

The governor's announcement on Wednesday that banks would be able to reduce their holdings of liquid assets by £90bn, thereby making it easier for them to lend, strengthened the belief that Threadneedle Street was being too pessimistic about growth prospects.

But Carney insisted that the 7% jobless rate was a "staging post", which would not necessarily lead to borrowing costs going up but only require the nine-strong monetary policy committee to re-think its approach. The jobless rate stands at 7.8% currently.

He said the Bank's task was "to secure the fledgling recovery, to allow it to develop into a period of sustained and robust growth. We aim to get there in part by reducing the uncertainty that has held back growth."

The Bank of England governor, Mark Carney
Since the MPC adopted its new policy of forward guidance in July, investors have brought forward their expectations of a rate rise, amid strong economic data for the UK, and fears about the knock-on effects if the US Federal Reserve phases out its own $85bn(£55bn)-a-month programme of QE.

But the new governor insisted the Bank will not be swayed by decisions made thousands of miles away in Washington.

"While much has been made of the special relationship between the US and UK, it is not so special that the possibility of a reduction in the pace of additional stimulus in the US warrants a current reduction in the degree of monetary stimulus in the UK," he said.

City analysts said, however, that the speech lacked details of how exactly Carney and his colleagues will respond if the current market reaction persists.

"If market rates are at 'unwarranted' levels and rise further, putting recovery in the real economy at risk, what would the BoE do?", said Ross Walker, UK economist at Royal Bank of Scotland.

Simon Wells, of HSBC, said: "There was little attempt to talk the market down with threats of imminent easing. Even if Mr Carney is personally irritated or concerned by the rise in market rates, he probably knows that there is little chance of garnering a majority on the MPC for policy loosening at this stage".

Carney did explain how he plans to use the Bank's new powers to supervise Britain's banks, in order to underpin recovery. He confirmed that once individual banks have increased their capital levels to the new minimum level of 7% of their risk-weighted assets, the Prudential Regulatory Authority will relax liquidity rules, allowing them to hold less of their capital in the form of the most liquid instruments such as government bonds. In total, the Bank says the move could free up £90bn for new lending.

The governor also addressed fears that the government's various schemes to rekindle the housing market, coupled with the Bank's promise to keep rates low, risked stoking a new speculative bubble. He said there was little evidence of a boom, with mortgage approvals running at just over half their pre-crisis level, and debt servicing costs low.

But he added that the Bank was "acutely aware of the risk of unsustainable credit and house price growth and will be monitoring it closely".

Article Source : http://www.guardian.co.uk

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'Big four' banks cut 189,000 jobs worldwide in five years

By the end of this year, Britain's four biggest banks will have axed 189,000 jobs around the world in the five years since the financial crisis broke, according to new calculations.

The figures, compiled by Bloomberg, show that Royal Bank of Scotland, Lloyds Banking Group, Barclays and HSBC will have cut their global headcount by 24% to a nine-year low of 606,000, compared with their pre-crisis peak of 795,000 in 2008.

Royal Bank of Scotland Holdings has axed 78,000 jobs since its £45bn taxpayer bailout in 2008. This includes 4,000 roles in its UK high-street banking business. Sir Philip Hampton, chairman of the bank, which is now 81% owned by the taxpayer, told shareholders this month that further job cuts could not be ruled out.

An RBS spokeswoman said the 78,000 job losses included 39,000 staff who had worked for Fortis and Santander when the three banks joined forces to launch a takeover of Dutch rival ABN Amro in 2007. This is now seen as one of the most disastrous acquisitions in business history, squeezing RBS's capital buffers to tiny margins and exposing the Edinburgh-based bank to rotten US sub-prime loans.

UK banks have reduced their global headcount by 24% since 2008

HSBC, Europe's largest bank, is down to 254,000 staff, compared with 313,000 in 2008. The bank infuriated unions last month when it described 3,166 job losses as "demising" roles. HSBC chief executive Stuart Gulliver plans to slim the bank further, cutting staff to 240,000 by the end of 2016 to trim costs and boost shareholder dividends.

An HSBC spokeswoman said the bank had made a net reduction of 1,100 jobs in the UK, once new positions were taken into account.

Lloyds, which received a £20.5bn bailout in 2008, will have cut 31,000 jobs by the end of this year, including 2,340 in 2013. The bank, now 39% owned by the British taxpayer, announced 850 job losses this month to cut costs, but was unable to give figures on how many of the 31,000 job losses were in the UK.

Barclays chief executive Antony Jenkins, appointed to clean up the bank after the Libor-rate rigging scandal, has said it may axe 40,000 roles in the coming years. Barclays will have cut 20,800 jobs by the end of this year since the start of the crisis. This includes about 5,500 jobs lost in the UK between 2008 and 2012.

The figures come after three of the four banks reported sharply improved profits. Last month, Lloyds posted first quarter profits of £2bn, up from £288m at the same time a year ago. HSBC this month said it made a quarterly pre-tax profit of $8.4bn, almost double the $4.3bn it reported at the same time last year. RBS swung to a £826m profit after a £1.4bn loss last time. Barclays last month reported adjusted first quarter profits had fallen 25% to £1.8bn, partly due to the cost of the bank's restructuring programme.

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Article source : http://www.guardian.co.uk

Niall Booker hired as new Co-op Bank executive

It is hoped veteran HSBC banker Niall Booker will help nurse struggling Co-op Bank back to health

The Co-operative Group has appointed a veteran former HSBC banker as the new boss of its struggling banking business, which saw its investment rating slashed to junk status earlier this month.

Niall Booker, 54, spent 30 years at HSBC, quitting in 2011 after nursing the bank's sub-prime lending business back to health.

Booker replaces Barry Tootell, who stepped down as chief executive of the Co-op Bank when credit rating agency Moody's expressed concerns about the bank's capital position and even hinted that it might need taxpayer backing. The agency slashed the bank's investment rating by six notches and analysts have estimated that the Manchester-based bank could need to find up to £1.8bn to boost its capital cushion.

The bank, part of the wider Co-operative Group that includes supermarkets, funeral services and pharmacies, is in talks with Britain's financial regulator to agree on a plan to address the shortfall.

The group's new chief executive Euan Sutherland – who took over earlier this month – is expected to update the Co-op board on the talks at a meeting on Friday.

The Co-op bank has had a tumultuous few weeks. In March it unveiled a £600m loss, largely as a result of losses on bad loans and compensation for mis-selling payment protection insurance.

One of the UK's smaller banks, with 6.5 million customers and only 2% of the current account market, it had nevertheless planned to expand rapidly and was negotiating to buy more than 630 branches from Lloyds. Its ambitious plan, which would have given it an extra 4.8 million customers and a total of 942 branches, was welcomed by the government, which is keen to see new competitors to take on the existing big four banks.

 But the deal fell apart, with the Co-op blaming regulators and the difficult economic backdrop. Two weeks later came the Moody's downgrade. Last weekend it emerged that the Co-op had halted all new lending to small business customers.

Sutherland, who was previously chief executive of DIY group B&Q, said in a statement: "The board and I are confident that Niall will add tremendous value, helping us work through the complex issues that we currently face as we work to reposition our bank."

There has been speculation that the Co-op might wind down the bank, but Booker's appointment was being viewed as a commitment to the business.

Booker, who is expected to split his time between London and Manchester, said: "There are no quick fixes here, but with the support of the Co-operative Group, our staff and our loyal customer base, I am confident we will be able to stabilise and develop the franchise."

The Co-op had planned to release the details of Booker's appointment this morning, when the stock exchange reopens, but news of his appointment leaked over the weekend. The group does not have shareholders, but does have bondholders.

Booker, a Cambridge graduate, joined HSBC in 1981 and has worked across retail and corporate banking businesses. He was chief executive of HSBC in India and of the bank's Middle East operations before being posted to the US.

HSBC was last year fined $1.9bn (£1.2bn) by the US department of justice for "stunning failures of oversight", which allowed drugs cartels and terrorists to launder hundreds of millions of pounds through its US and Mexican businesses. HSBC had earlier hit problems with its sub-prime lending business – which provided loans to high risk borrowers – and Booker was parachuted in to put the business back on an even keel. He left the bank in October 2011 and has been looking for a new role since then, said a Co-op spokesman.

Sutherland said: "With his strong background across the banking sector, covering both retail and corporate, he is the ideal person to lead The Co-operative Bank at this important time in its history. He clearly brings the strategic and operational skills that we need to help take the bank to the next stage of its development."

Booker's experience of working with regulators is also understood to have been key.On Monday the Co-op refused to say when it had approached Booker or divulge his salary. But a spokesman said it was likely to be more than the £522,000 earned by his predecessor, as Booker has also been installed as the group's deputy chief executive.

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Article source : http://www.guardian.co.uk

HSBC faces court threat as deal on money laundering charges stalls

Judge may take action that could leave HSBC facing a criminal prosecution and threat to its ability to do business in the US 

HSBC's controversial $1.9bn (£1.6bn) settlement deal with the US authorities over money laundering charges has stalled after a row between the justice department and the judge overseeing the case.

The deal – known as a deferred prosecution agreement (DPA) – meant HSBC was exempt from prosecution and triggered a storm of criticism. Judge John Gleeson is now believed to be considering rejecting the deal, a move that could leave HSBC facing a criminal prosecution and the threat that its charter to do business in the US could be revoked.

The bank will hold its annual meeting in London on Friday and is expected to be asked for an update on the agreement.

US authorities reached the deal with HSBC last December after uncovering evidence that the bank had illegally conducted transactions on behalf of Mexican drug lords, terrorists and customers in Cuba, Iran, Libya, Sudan and Burma – all countries that were subject to US sanctions.

Gleeson, a former assistant attorney general, made his name prosecuting drug rings and organised crime, most notably securing the conviction of John Gotti, the Gambino crime family boss. The justice department is believed to be challenging the need for Gleeson's approval after failing to get a quick signature while the judge is upholding his opinion that he must sign off on the DPA.

Court officials would not comment on the case. The judge last referred to the case on 15 February, noting solely that he had not yet approved or disapproved of the settlement. Last December Gleeson said there had been "much publicised criticism" of judges rubber-stamping DPAs.

The agreements are an increasingly common settlement which allow a company to pay a fine to stop a criminal prosecution.

John Coffee, Adolf A Berle professor of law at Columbia University, said judges were increasingly unhappy with DPAs.

"There is a serious disconnect between judges and prosecutors about whether prosecutors are doing anything meaningful," he said.

Senator Chuck Grassley lambasted the justice department over the settlement last year and said it was "inexcusable" that they had not brought a criminal prosecution against the bank. "What I have seen from the department is an inexplicable unwillingness to prosecute and convict those responsible for aiding and abetting drug lords and terrorists. I cannot help but agree with an editorial in the New York Times that 'the government has bought into the notion that too big to fail is too big to jail'," he wrote in a letter to attorney general Eric Holder.

At the time of the deal's announcement Stuart Gulliver, HSBC chief executive, said: "We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again."

HSBC has been seeking a deferred prosecution agreement.

 HSBC has undergone a drastic management overhaul since the issues came to light and has strengthened its compliance policies and procedures. It is continuing to implement those changes as the US authorities work on a resolution to the DPA disagreement.

Stuart McWilliam, senior campaigner with lobby group Global Witness, said: "News that the DPA hasn't yet been signed off gives the justice department a clear opportunity to reconsider the penalties HSBC should face for its widespread money laundering failures.

"Given that over 35,000 people were brutally slain in Mexico at the hands of drug traffickers while HSBC laundered at least $880m of their money, it's shocking that the current system of sanctions does not include senior executives being held personally responsible for the actions of their institutions. Is HSBC too big to jail?"

Gleeson would not be the first judge to challenge a DPA in recent months. Last year Jed Rakoff refused to sign off on an agreement between Citigroup and the Securities and Exchange Commission over the sale of "toxic" mortgage bonds. In his opinion the $285m settlement was "neither reasonable, nor fair, nor adequate, nor in the public interest". That dispute is ongoing.

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Article source : http://www.guardian.co.u