HSBC 2012 Annual Report Download - page 8

HSBC HOLDINGS PLC
Report of the Directors: Overview (continued)
Group Chairman’s Statement
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culture with a view to making recommendations
designed to restore trust and confidence in banks.
We are committed to working constructively
with public policy makers and our regulators to give
effect to these proposals. We note, however, two
areas of concern.
First, it is perplexing that, after the great
international effort invested in the G20 programme
of sound and consistent global financial regulation,
and the extent of reform currently underway, an
increasing number of countries now appear to
be acting unilaterally, thereby putting globally
consistent regulation at risk of fragmentation and
‘balkanising’ the capital and liquidity resources of
firms.
Second, we believe the sheer scale and timescale
of the reform programme is hampering investors’
line of sight to the long-term returns available.
Resolving these two issues, which will require
inter-governmental direction and co-operation,
would contribute to enhancing the ability of the
industry to support the economic growth agenda
now being prioritised in most parts of the world.
Enforcing global standards
The Board is determined to adopt and enforce the
highest behavioural and compliance standards in
HSBC. For well documented reasons, the last two
years have been extremely damaging to HSBC’s
reputation and to our perception of ourselves. We
faced serious failings both in the application of our
standards and in our ability to identify, and so
prevent, misuse and abuse of the financial system
through our networks. Our strategy is entirely
configured to eliminate the possibility of this
happening again.
We have apologised unreservedly to all our
stakeholders and have paid huge penalties both in
monetary cost and reputational damage. More
important than apologies, however, are the steps
being taken to prevent recurrence. Management
under Stuart Gulliver, the Group Chief Executive,
is leading the work to simplify business and so
reinforce risk management and control.
Our success in meeting our objectives will be
subject to independent validation not simply through
ongoing regulatory review but additionally through
the appointment of an independent Monitor who will
report to both UK and US authorities. We welcome
the additional rigour this will bring to the process of
upgrading and enforcing our global standards.
To reinforce the Board’s ability to exercise
rigorous governance over these endeavours, we
announced the creation of a new Board committee,
the Financial System Vulnerabilities Committee
on 30 January 2013. This committee will provide
governance, oversight and policy guidance over the
framework of controls and procedures designed to
identify areas where HSBC may become exposed
and, through that exposure, expose the financial
system more broadly to financial crime or system
abuse.
Five subject matter experts drawn from the
highest levels of public service will support the
committee. Their expertise includes the combating
of organised crime, terrorist financing, narcotics
trafficking, tax evasion and money laundering as
well as expertise in intelligence gathering and
international payments systems. They will provide
invaluable guidance and advice, and most
importantly challenge, as we strengthen our
capabilities and enforce the highest standards.
Further details of the background and experience
of these individuals are contained in the Directors’
Report.
Recognising the need to augment the Board’s
own experience and expertise we have also added
specialist expertise at Board level.
Board changes
At the end of 2012 we said farewell to Narayana
Murthy, who stepped down from the Board after
serving with distinction for five years. Narayana, as
co-founder and long-term CEO of Infosys, brought
to the Board exceptional expertise in technology,
operational efficiency and outsourcing matters as
well as an in-depth knowledge of India and of
international business through his experience on
many multinational and educational boards. On
behalf of the Board and shareholders I want to
record our appreciation and gratitude for his
contribution to HSBC.
We welcome two new directors to the Board.
Renato Fassbind joined the Board on 1 January
and will serve on the Audit and Remuneration
Committees. Renato brings to the Board
considerable international business and financial
expertise from a distinguished career in industrial,
service and financial companies. He is currently
Vice Chairman of the Supervisory Board and a
member of the audit and the compensation
committees of Swiss Reinsurance Company,
a member of the Supervisory Board and audit
committee of Kühne + Nagel International AG