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Analysis: HSBC’s collections and recoveries operations under FCA investigation

The Financial Conduct Authority (FCA) is investigating HSBC’s UK collections and recoveries operations, its half-yearly report has revealed.

The probe is mentioned in the report as one of the various regulatory matters the group is facing, but no detail is provided. Credit Strategy sought more details from HSBC but the bank said it would be “inappropriate to comment on an ongoing investigation.”


The FCA is also at an "advanced stage" in an investigation into Barclays’ collections and recoveries controls.


As well as being under investigation by the FCA, HSBC has also had an information request from the UK Competition and Markets Authority.


The section on regulatory matters also provides an update on the money-laundering cases HSBC is fighting as a defendant.


Since November 2014, a number of lawsuits have been filed in courts in the US against various HSBC companies on behalf of plaintiffs who are, or related to, victims of terrorist attacks in the middle east or of cartel violence in Mexico. It is alleged that HSBC aided and abetted the unlawful conduct of sanctioned parties in violation, of the US Anti-Terrorism Act.


According to the report, 10 actions remain pending. In March, September and October 2019, the courts granted HSBC’s motions to dismiss three of these cases. Two of these face appeals. HSBC has filed motions to dismiss three further cases, two of which were granted in June 2020, while the third remains pending. The four remaining actions are at a very early stage.


Performance and payment holidays

Elsewhere, the results also show that HBSC’s profit after tax has fallen to 69% to $3.1bn during the first half of 2020, while over 700,000 payment holidays have been granted, according to its half yearly report.


The decline was attributed to higher expected credit losses and other credit impairment charges in combination with lower revenue. In the first half of 2020, lending decreased by $18bn on a reported basis.


HSBC granted more than 700,000 payment holidays for personal lending customers across loans, credit cards and mortgages, providing more than $27bn in customer relief in the first half of 2020. HSBC stated that customers’ arrears statuses are not worsened by the utilisation of payment holidays.


Credit losses

Expected credit loss increased by $5.7bn to $6.9bn compared to the same period of 2019. This was due to the impact of the Covid-19 outbreak and the forward economic outlook, and due to an increase in charges related to specific wholesale customers. The allowance for general expected credit losses increased to $14.5bn, as at 30 June 2020, from $9.4bn at 31 December 2019.

In the first half of 2020, settlements and provisions in connection with legal and regulatory matters were $5m, which was up from $2m the same period the year before.


Operations amid Covid-19

HSBC reported that 85% of its total workforce is now enabled to work from home.


Noel Quinn, group chief executive, said: "Our first half performance was impacted by the Covid-19 pandemic, falling interest rates, increased geopolitical risk and heightened levels of market volatility. We are looking at what additional actions we need to take in light of the new economic environment to make HSBC a stronger and more sustainable business."


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