* Structure was "not fit for purpose" in modern world -CEO
* Says structural change was biggest in HSBC's history
* Mexico failures "crushed our reputation"
By Steve Slater
LONDON, Feb 6 HSBC was forced into its
biggest restructuring in almost 150 years because the bank's
complex structure and wide geographical spread had made it
attractive to criminals, its chief executive said.
"Our structure was not fit for purpose for a modern world,"
Stuart Gulliver told lawmakers on a British banking inquiry on
Wednesday. "Our geographic footprint became very attractive to
trans-national criminal organisations, whether they are
terrorist in origin or criminal in origin."
HSBC, whose former slogan "The world's local bank" reflects
its presence in more than 80 countries, was in December given a
$1.9 billion fine, the largest ever imposed on a bank, following
a U.S. investigation into its Mexican and U.S. operations.
The probe made scathing criticism of HSBC's
anti-money-laundering systems and found its lax controls allowed
two drug cartels to move $881 million through the bank.
"We've crushed our reputation with the Mexico events,"
Gulliver said. "The behavioural stuff of what went on in Mexico
is absolutely shocking to us."
After taking the bank's helm at the start of 2011, Gulliver
centralised control and created global business operations,
taking much of the control out of the hands of country
"It's the biggest organisational change in this firm since
1865 and we did it to deal with the weaknesses," the CEO said.
HSBC's problems in Mexico stemmed from its purchase of Grupo
Financiero Bital in 2002, and Gulliver and his chairman, Douglas
Flint, said the bank was too slow to improve its systems and
Gulliver said some senior people had been removed from the
bank for "values breaches" in the last two years, but he said
there were rewards on offer as well as penalties.
The bank's chief risk officer is likely to be the
fifth-highest paid person at the bank in 2012, whereas he
wouldn't have been in the top 50 in 2006, he said.
The CEO has sold or exited from 45 businesses deemed
non-core in the last two years, in an attempt to not only reduce
complexity, but also cut costs and boost profitability.
Last week it set up a Financial System Vulnerabilities
Committee to help further simplify business activities and spot
risks in areas such as preventing terrorist financing or illegal
"We're not saying the job is done ... the people we're
dealing with are highly sophisticated and will continue to
change their ways of trying to penetrate the banking system,"