The chief executive of HSBC, the world’s fourth-largest bank, has warned that the state-sponsored bail-outs of western banks could encourage a return of reckless behaviour in the City and other financial centres.
Michael Geoghegan said the conservative policies followed by his bank in recent years, which were criticised by some shareholders, had provided a solid base to weather the financial storm. He said rival banks had taken risks and been punished by the markets – only to be rescued by the government’s £37bn package.
He said: “I hope these guarantees are not in place for too long. They may create the wrong type of behaviour by managements in those banks…”
Although the bank yesterday announced a huge write-down on its US operation and predicted the financial turmoil would greatly slow economic growth around the world, it was upbeat about its prospects.
The bank said it had boosted its finances, maintained its dividend and declared only a small dip in profits after successfully navigating the events of the past month that saw all its UK rivals survive only with a £37bn bail-out. Geoghegan said the crisis showed how HSBC’s policies protected shareholders when times were tough.
Cripes. HSBC lends money based on real assets and makes a profit. Why should they have to tolerate competition from sleazy, semi-solvent hustlers who profited – for a while – from illicit property valuations?