City regulator probes HSBC executive over control failings

A senior HSBC executive is being investigated by the City watchdog over the supervision of systems and controls in the vast unit which houses its global investment banking operations.

Sky News has learnt that Paul Watson, whose LinkedIn profile gives his job title as head of regulatory compliance for the Global Banking and Markets (GBM) division of Europe’s biggest lender, is the subject of an ongoing probe by the Financial Conduct Authority (FCA).

The status of the FCA inquiry was unclear on Tuesday, although it is thought to have been under way for some weeks.

Sources said the investigation was focused on the adequacy of Mr Watson’s efforts to discharge his responsibilities in a competent fashion.

There is no suggestion that he is being scrutinised for any form of personal misconduct, and he is said to still be undertaking his role while the investigation continues.

The examination of Mr Watson is said to be connected to a wider so-called skilled person’s inquiry commissioned by the FCA into systems and controls at HSBC, part of which relates to GBM.

Mr Watson, who has worked in his role since 2003, according to his LinkedIn profile, is not part of the Senior Managers’ Regime introduced in 2016, but does hold what is known as a controlled function, which requires regulatory approval.

The emergence of the investigation comes at an awkward time for HSBC’s GBM division, which was the subject of an explosive memo purportedly written by a group of disgruntled current and former HSBC employees who accused senior executives of presiding over a culture of rewards for failure.

HSBC has hired Allen & Overy, the Magic Circle law firm, to oversee its own inquiry into the memo under formal whistleblowing procedures.

It was initially sent to Mark Tucker, HSBC Holdings’ chairman, and John Flint, the new chief executive, who is regarded as having a lukewarm attitude to parts of the group’s global banking and markets operations.

Last month, HSBC confirmed a Sky News report that it had hired Greg Guyett, a former JPMorgan banker, to work alongside Robin Phillips as co-head of global banking.

Mr Phillips was singled out for criticism in the anonymous memo but retains the support of many of his colleagues.

“The division’s leadership has, year-on-year, utterly failed to create a successful strategy,” the note said.

“We are entirely fed up and demoralised and have no confidence at all in the existing leadership.”

The episode has cast renewed doubts over the strategy of parts of GBM, even as its supporters point to HSBC’s leading global position in a number of key areas of financing activities.

The GBM business is overseen by Samir Assaf, its veteran chief executive, and has sought to exploit HSBC’s status among the lenders best-placed to exploit growing trade flows between the world’s faster-growing economies.

Like other UK lenders, HSBC has faced a lengthy charge sheet since the 2008 banking crisis, with regulators in several countries penalising it with billions of pounds in fines for mis-selling loans, manipulating foreign exchange transactions and failing to prevent its Mexican operations being used by drug cartels.

HSBC and the FCA declined to comment.

Sky News | November 6, 2018