HSBC Probe Signals Big Bank Legal Crackdown

In late October, Barclays also said it may be fined by U.S. regulators for alleged manipulation of energy trading markets and it said that lawmakers are also looking into whether the British bank violated the U.S. Foreign Corrupt Practices Act. Barclays said the U.S. Federal Energy Regulatory Commission is probing the bank's power trading unit and could levy penalties shortly. The regulator subsequently asked for a fine of $470 million, however a settlement is yet to be reached.

U.S. lenders like Bank of America, Citigroup and JPMorgan also face big potential costs tied to interest rate manipulation, and uncertainty continues to loom over the impact of housing crisis-related lawsuits.

Meanwhile, amid a sharp drop in trading, IPO and M&A volumes, some large investment banking players like UBS (UBS) are retreating from Wall Street areas that once were a key driver of profits.

In late October, UBS, one of the largest investment banks in Europe and owner of a football-field sized Stamford, Conn., trading floor, said on Tuesday it is throwing in the towel on many of its trading businesses amid a plan to cut 10,000 jobs that acknowledges the bank can no longer earn money from much of the trading that once dominated Wall Street.

Earlier in October, Citigroup (C) ousted its long-time CEO Vikram Pandit, in a move that signals the bank may refocus on traditional Main Street lending businesses over Wall Street trading, where Pandit had cut his teeth.

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Taken as a whole, the negative news emanating from the likes of HSBC, Barclays, UBS and JPMorgan signal that as financial sector giant's head into 2013, the industry outlook remains muddled by scores of legal challenges.

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-- Written by Antoine Gara in New York

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