Reuters: Regulatory News: UPDATE 1-S&P lowers HSBC outlook to negative, cites regulatory issues

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UPDATE 1-S&P lowers HSBC outlook to negative, cites regulatory issues Aug 23rd 2012, 18:19 Thu Aug 23, 2012 2:19pm EDT Aug 23 (Reuters) - Standard & Poor's lowered its outlook on HSBC Holdings PLC to negative from stable on Thursday, leaving the bank more vulnerable to a ratings downgrade some time in the intermediate future. The ratings agency said that money-laundering allegations against HSBC may cause the British bank to lose business and face additional costs related to regulatory fines and litigation. A negative outlook signifies that S&P may lower a company's ratings over the next six months to two years. For now, S&P reaffirmed HSBC's long-term counterparty credit rating of A+, which is six notches within the investment grade category. A U.S. congressional panel report in July detailed apparent anti-money-laundering compliance failures related to cash routed from countries including Mexico, Iran, the Cayman Islands, Saudi Arabia and Syria. S&P said the report signified problems with HSBC's risk-management controls and culture, and showed that the bank "may have prioritized cost management over control effectiveness." Although HSBC recently made changes to address those problems, issues from the past may still lead to costly regulatory sanctions and litigation, and also threaten the bank's trade finance business, particularly in the United States, S&P said. S&P noted that HSBC has built up $2 billion worth of provisions for regulatory fines and related costs during the first six months of 2012, on top of $1.1 billion worth of provisions last year, but that the extent of U.S. regulatory actions against HSBC "remains uncertain." Link this Share this Digg this Email Reprints

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