Daruma

Open Season on HSBC
News that HSBC and other banking institutions have been subpoenaed by the US Justice Department could not have come at a worse possible time for the UK banking giant.

As one negative article about HSBC followed another over the past month, it looked like open season on the British bank, one of the world's biggest, a report in the Herald Tribune suggests.

"The raft of negative articles so worried the London-based bank that it agreed to a couple of interviews with its top executives during the "close" period before it announces full-year results in March, an interval during which it has generally kept a low profile to avoid disclosing too much information and incurring the wrath of regulators."

Now come the potential privacy issues and - to be fair - HSBC has apparently not yet turned over documents to the US Justice Department.

The Register reports that on Friday, the Federal Government issued subpoenas to major European banks, including Credit Suisse and HSBC, demanding copies of all business records, correspondence, and emails related to internet gambling transactions.

"The subpoenas are the latest extraterritorial assault by the American government on foreign institutions involved with online gaming. Earlier in the week, two former executives of NETeller, a British payment processing service, were arrested on money laundering charges in connection with NETeller's online gaming financial transactions, although neither was currently involved with the company in any managerial capacity."

The Herald Tribune, meanwhile, brings up additional concerns over HSBC's image:

"For fund managers who bought the shares or analysts who recommended them, the fact that HSBC was one of the worst-performing bank shares globally in 2006 had something to do with it. And this in turn had a lot to do with the dollar's sharp fall against the pound, as the bank makes 65 percent of its profit in dollars or dollar- linked currencies.

"Additionally, the bank said, investors do not like two uncertainties: not knowing how the bank's U.S. exposure will develop, since that depends on the performance of the U.S. economy, and the picture is now mixed; and not knowing, because it is too early, whether the funds HSBC put into developing its investment bank will yield a significant return."

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