HSBC CEO calls for higher rates to fight inflation

"I'm not a great fan of regulation ... but there will be a need to look at the model in that area," he said, adding that banks should focus on lending and investment advisers on advising clients, although he did not call for any specific measures.

"The investment banking model is flawed," Geoghegan said.

"If banks aren't strong, they should be restructured or taken over," he added.

HSBC, which Geoghegan said has no plans for a share buyback, has managed to weather the credit crisis that erupted last summer better than many of its peers thanks to a significant presence in emerging markets in Asia and the Middle East.

In the first quarter of this year, the lender booked a bad debt charge related to its U.S. consumer finance business of $3.2 billion (1.6 billion pounds), less than the $4.6 billion in the previous quarter but double the level of the first quarter in 2007.

Geoghegan, speaking to reporters following an informal shareholders' meeting in Hong Kong, declined to project any further provision to cover subprime losses, but added that 80 percent of customers in the U.S. finance unit are still paying their mortgage bills.

Earlier this month, the bank said first quarter profit was higher than a year ago despite some $5 billion in write-downs and charges related to bad debts.

HSBC, whose shares were down 0.44 percent in London trade on Tuesday after closing 0.31 percent higher in Hong Kong, is due to report its first-half results on August 4.

(Editing by Tony Munroe, Paul Bolding)