This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

HSBC Probe Signals Big Bank Legal Crackdown

Stocks in this article: HBC BCS JPM BAC C UBS

NEW YORK ( TheStreet) -- British banking giant HSBC (HBC) has more than doubled the earnings hit it's expecting from U.S. regulators in a multi-year money laundering probe that the lender now says may prompt criminal charges.

In earnings released on Monday, HSBC increased its provision for a U.S. Senate-backed money laundering probe by $800 million to a total of $1.5 billion, and it cautioned investors total legal counts could run "significantly" higher. The embattled bank also said that it is "likely" to face criminal and civil charges in relation to the probe.

The disclosure follows a settlement with U.S. regulators by competitor Standard Chartered (BCS) that totaled $340 million, and indicated that as regulatory probes widen, the worst may still be to come for banking giants.

"The final amount of the financial penalties could be higher, possibly significantly higher," HSBC said in a Monday statement released with earnings. "The resolution of at least some of these matters is likely to involve the filing of corporate criminal as well as civil charges," the bank added.

HSBC's comments and new legal provision come on the heels of a Senate committee probe that concluded in July HSBC's anti money-laundering controls were ineffective, giving terrorists and drug cartels access to the U.S. banking system. In August, Standard Chartered paid New York State regulators $340 million for its alleged violation of U.S. financial sanctions against Iran.

While the size HSBC's provision surprised some investors and caused shares to fall sharply in Monday trading, legal challenges have hung over the financial sector for years and may yet escalate.

The largest lenders in the U.S. and Europe like JPMorgan (JPM - Get Report), Bank of America (BAC - Get Report), Citigroup (C - Get Report), Deutsche Bank (DB) and Barclays (BCS) face a litany of potential costly legal and regulatory settlements, which only cloud a bleak outlook for banking conglomerates.

In particular, global banking giants face the prospect of hundreds of millions or billions in legal costs tied to the alleged manipulation of interest rates.

Already, Barclays has accepted a near $500 million fine for its manipulation of interest rates, a settlement that indicated widespread fraud throughout the financial sector. The fine cost company CEO Bob Diamond his job and indicated other major banks may yet take a similar hit, as a global probe intensifies.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs