Being the country of new age millionaires doesn’t stop yet another bank to shut down their private banking. By Yugansha Malhotra
“Banks including Royal Bank of Scotland and Morgan Stanley, have recently sold their onshore India private banking units as part of their global business restructuring. HSBC is the latest one to do the same.”
HSBC Private Banking, that aimed to provide tailored wealth management services in order to grow, manage and preserve the wealth of private investors, decided to halt their services of private banking in India. HSBC Holdings is shutting down its private banking operations in India, the news came amid an ongoing investigation by India’s tax department. As per the experts, it is being thought of as a fallout of the investigation into allegations that, the bank failed to prevent money laundering. It marks the exit of another foreign bank from the cutthroat wealth management business in Asia’s third-largest economy. Banks including Royal Bank of Scotland and Morgan Stanley, have recently sold their onshore India private banking units as part of their global business restructuring.
The bank’s private banking business will be closed down by the first quarter of 2016 and some of its private banking clients will be moved to its premier banking division. They vowed to work closely with their clients to minimize the impact of the incident, and they have also offered the clients to move to HSBC Premier, which is their global banking and wealth management proposition. HSBC was among the top ten wealth managers in the country, with about 1,000 clients and assets under management of about $2-2.5 billion. HSBC’s decision to exit India private banking business comes at a time when India’s homegrown wealth managers are hiring more staff and expanding in smaller cities, seeking to attract rising numbers of new millionaires. It seems curious, that an expanding market would be left unheeded by the bank, even after it accomplishes the motive of the bank.
The bank has been under the scrutiny of the US Justice Department and authorities in Geneva since 2009, while the Reserve Bank of India has also probed HSBC India’s operations for purported irregularities in its attempts to prevent money laundering. The bank’s global operations have also been under a cloud as the US Senate Committee on Homeland Security and Governmental Affairs, in its July 17, 2012, report on HSBC’s Anti-money Laundering (AML) supervision, had said that the bank’s processes in this critical area were weak and vulnerable to the flow of money from terror elements.
Also, Indian taxmen searched the headquarters of HSBC, in regard to the allegations that the bank’s Swiss business helped the clients to dodge paying taxes. This came to the notice, when the details of Swiss private banking operations and the clients were published to the media. It has also been alleged that HSBC’s AML (anti money laundering) compliance department was greatly understaffed. HSBC’s private banking business in India has the manpower of 70, who would be moved to its retail arm. The bank’s total employee strength in India will remain the same at 32,000, even after the closure of the division. HSBC did not give any reasons for its decision, but banking executives within and outside the bank said that, it might be the result of direct fallout of the information leak by former HSBC staffer Herve Falciani in 2008 which included names of 1,195 Indians who had evaded taxes in the country to stash it in the bank’s Swiss branches. The process is likely to be completed in the first quarter of 2016. Ambushing all the rumors aside, the spokesperson highlights this shut down as further progress in the HSBC group strategy to simplify matters, and to deliver sustainable growth.