Bloomberg guest columnist Simon Johnson says that bankers have made some dramatic moves in recent years, but even the most cynical observers were stunned last week when David Bagley, HSBC's top compliance officer, resigned during a U.S. Senate hearing.
'As I have thought about the structural transformation of the bank’s compliance function', he told the senators, 'I recommended to the group that now is the appropriate time, for me and for the bank, for someone new to serve as the head of group compliance'.
Translation: I am taking responsibility for the complete failure of compliance on my watch.
The failure is indeed complete. Investigators working for Democratic Senator Carl Levin of Michigan have established a decade-long pattern of behavior in which HSBC, one of the world’s largest banks, provided money-laundering services to drug traffickers in Mexico and criminals around the world. The bank also broke U.S. laws restricting transactions with Iran.
These were not isolated occurrences. No doubt some bank employees had gone rogue, yet the problems went far beyond that, including willful blindness by senior executives. The point of compliance is to catch such behavior before it damages the brand and threatens to bring down the company.
The bank’s management failed in this regard, and the buck shouldn’t stop with Bagley. Chief Executive Officer Stuart Gulliver should take responsibility by stepping down. What’s more, his successor should break the bank into more manageable parts.
Something has gone very wrong on Gulliver’s watch. Why would any responsible board of directors trust him to clean up properly ? Three arguments are being advanced for why he needn’t resign; none is convincing.
Hit the link below to access the complete Bloomberg article:
Simon Johnson, a professor at the MIT Sloan School of Management as well as a senior fellow at the Peterson Institute for International Economics, is co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.
The opinions expressed are his own
image: © Dave Crosby