by Lady Michelle-Jennifer Santos, Chief Visionary Founder & Owner
August 6, 2013 (TSR) – Diplomats in London have been given shock and awe, the financial kind: HSBC Holdings Plc (HSBA), Europe’s biggest bank, has told dozens of foreign missions in London that it will close their bank accounts and gave them 60 days to move their business somewhere else.
Thrown into chaos, the diplomats across the British capital have scrambling to find a new place to put their money, but it gets worse. Other banks have been closing ranks and refusing to take their business and as clients as well.
Bernard Silver, an ex-honorary consul who serves as president of the Consular Corps of London, said he’d been told by British officials that more than 40 different embassies, consulates, and High Commissions had been affected.
Even the Vatican has been given its marching orders and sacked as customer according to The Mail on Sunday. The Pope’s representative office in Britain, the Apostolic Nunciature, has banked with HSBC for many years but was told to find another bank.
The various diplomatic missions are equally confused and in fraught.
“We’ve been banking with HSBC for 22 years and for them to throw us off in this way was a bombshell,” John Belavu, minister at the Papua New Guinea High Commission, said.
“We have been trying everyone, but all the UK banks are clamming up, ” Lawrence Landau, honorary consul of Benin, said.
“HSBC did not give us any real explanation. They have only given us until the middle of August to find another bank. We can’t find one and we are going crazy,” one diplomatic source said.
Embassies also have to pay for ambassadorial accommodation and sometimes even school fees for diplomats’ children. None of these bills can be settled without a valid British bank account.
“HSBC’s decision has created havoc. Embassies and consulates desperately need a bank, not just to take in money for visas and passports, but to pay staff wages, rent bills, even the congestion charge,” Silver said.
HSBC spokesman Will McSheehy said Sunday that the move was taking part of a wider reassessment of its business started by chief executive Stuart Gulliver in 2011. As of May, the bank’s retrenchment strategy has seen 52 peripheral or underperforming units close and a loss of roughly 40,000 staff.
McSheehy said the changes had translated into a “significantly diminished appetite for the embassy business,” although he declined to reveal how many U.K. missions had their accounts pulled.
One diplomatic source said he believed HSBC feared being exposed to embassies after it was fined $2billion (£1.32billion) by US authorities last year.
Foreign missions traditionally deal in large amounts of cash, something which may have raised uncomfortable questions at a bank that has been buffeted by money laundering scandals.
In 2012 HSBC was blamed for alleged money-laundering activities said to have been conducted through its Latin American operations by drug cartels. HSBC admitted at the time that it had failed to effectively counter money laundering.
HSBC is still struggling to clear its name, including in one case revolving around a former employee who claims to have evidence showing “scandalous” levels of tax evasion and money-laundering at the company.
McSheehy said that compliance issues were just one of many factors such as profitability or efficiency which the bank had assessed.
“There’s no one single reason,” he said, AP reports.
Banking sources said diplomatic missions are considered to be ‘politically exposed’, which means they are at risk of money laundering activities.
HSBC, however, claims its decision is part of an assessment of all business customers to see if they satisfy five criteria – ‘international connectivity, economic development, profitability, cost efficiency and liquidity’.
One diplomat said: ‘We don’t even know what these criteria mean.’
HSBC would not explain the requirements to The Mail on Sunday and merely said: ‘HSBC has been applying a rolling programme of “five filter” assessments to all its businesses since May 2011, and our services for embassies are no exception.’
The Foreign & Commonwealth Office said it was in contact with HSBC and had provided a number of diplomatic missions with letters of introduction ‘to help in opening a new bank account’.
A spokeswoman said there was little more for the British government to do, AP cited.
HSBC slid in London and Hong Kong trading after profit missed analysts’ estimates and Chief Executive Officer Stuart Gulliver said fast-growing emerging markets are slowing, Bloomberg reports.
First-half net income rose 22 percent to $10.28 billion after U.S. loan impairments fell, the London-based lender said yesterday in a statement. That was less than the $10.57 billion estimate of five analysts surveyed by Bloomberg.
Bloomberg reports the mainland Chinese market slowed unexpectedly in the first quarter, while Latin American growth eased in the first half on weak consumer consumption and growth remains “subdued” in western economies.
HSBC also faces a potentially “highly damaging impact” from planned European Union restrictions on bonuses, the bank said. Furthermore, Gulliver has reversed the lender’s expansion in U.S. consumer banking and closed or sold 54 businesses since he took the top job in 2011 as he focuses on markets where the firm is most profitable.
HSBC, which operates in about 80 countries, has 55 million customers and 6,600 offices worldwide.