The PPI scandal has taken a further toll on the HSBC bank as it has now set aside 500 million pounds to deal with the payment protection insurance scandal as well as additional allegations being thrown its way by the American government. These additional allegations are potentially more disastrous for the bank’s fragile reputation.
Serious accusations were brought against the bank by the US government recently, causing HSBC to set aside over 1.5 billion American dollars to deal with any ensuing scandal. They have been accused of unknowingly assisting drug cartels and rogue states by allowing them to use the US arm of the bank to launder billions of pounds. No additional details as to how this was done – including any specifics – were divulged, but the financial institution’s reputation is already taking a serious hit. These are very serious claims and HSBC are reacting accordingly by using £500 million to cover the fines they will be hit with by the US authorities. There is still no agreement as to how much the bank will have to pay, but when all is said and done the amount could be considerably higher.
As if this new scandal wasn’t enough the bank has added 220 million pounds to their hefty payment protection insurance bill. Because they were mis-selling payment protection insurance at such a large rate they needed to increase the amount they had earmarked to compensate those who deserved refunds. Their bill has amassed to much more than they expected, so much so that with this additional £220 million they have now spent £1.2 billion on repaying payment protection insurance claims.
Between the PPI scandal and these new money-laundering accusations, HSBC’s pre-tax profits have decreased over 50 percent in the most recent three-month period. This newly projected profit of £2.2 billion is being attributed to the value of their current debt as well as the US government’s claims.