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Report Date : |
19.07.2012 |
IDENTIFICATION DETAILS
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Name : |
HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED |
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Representative Office : |
5th Floor, 52/60, |
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Country : |
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Financials (as on) : |
31.03.2011 |
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Date of Incorporation : |
01.01.1900 |
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Capital Investment / Paid-up Capital : |
Rs.44991.660 Millions |
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FCRN : |
F00947 |
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Legal Form : |
Foreign Registered Bank. |
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Line of Business : |
Banking Activities |
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No. of Employees : |
Information declined by the management |
RATING & COMMENTS
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MIRA’s Rating : |
Aa (80) |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
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Maximum Credit Limit : |
USD 550000000 |
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Status : |
Good |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
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Comments : |
Subject is a well established and a reputed bank having fine track.
Fundamentals are strong and healthy. Trade relations are reported as fair. Business
is active. Payments are reported to be regular and as per commitments. The bank can be considered normal for business dealings at usual trade
terms and conditions. |
NOTES :
Any query related to this report can be made
on e-mail : infodept@mirainform.com
while quoting report number, name and date.
INFORMATION DECLINED
Management non co-operative
LOCATIONS
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Registered Office : |
Located at Hong Kong |
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Representative Office |
5th Floor, 52/60, Mahatma Gandhi Road, Mumbai-400001,
Maharashtra, India |
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Tel. No.: |
91-22-22685555/ 40891300 |
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Fax No.: |
91-22-22658309 |
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E-Mail : |
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Website : |
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HSBC Group Head Office : |
HSBC Holding PLC, 8, |
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Tel. No.: |
+ 44-20-79918888 |
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Corporate Banking : |
Mumbai Telephone : 91-22-22681091 Kolkata Telephone : 91-33-22542063 Telephone : 91-12-44182102 Chennai Telephone : 91-44-43912005 Telephone : 91-80-25002002 |
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Institutional Banking : |
Mumbai Telephone : 91-22-22681017 Telephone : 91-11-41592290 Chennai Telephone : 91-44-4391-2016 |
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Treasury : |
Mumbai Telephone : 91 22 2268 5588 Toll -free : 1800 229876 |
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HSBC Securities Services : |
Mumbai Telephone : 91-22-40357471 |
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Located at: ·
Mumbai (Main Branch) ·
Andheri ·
Bandra ·
Borivli ·
Chembur ·
Juhu Vile Parle ·
Lokhandwala ·
Pedder road ·
Powai ·
Thane ·
Ahmedabad ·
Pune ·
Shivaji Nagar ·
Vadodara ·
·
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Located at: ·
Kokkata (Main Branch) ·
Gariahat ·
·
Itadanga ·
·
New Alipore ·
Shakespeare Sarani ·
·
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Located at: ·
·
Basans Lok ·
Greater Kailash I ·
South Extension ·
Gurgaon ·
·
Noida ·
Jaipur ·
·
Punjabi Bagh ·
·
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Located at: ·
Chennai (Main Branch) ·
Adyar ·
·
·
·
·
·
·
·
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DIRECTORS
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Name : |
Mr. Stuart A Davis |
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Designation : |
Chief Executive Officer, INM |
KEY EXECUTIVES
|
Name : |
Mr. Richard Collie |
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Designation : |
Chief Financial Officers |
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Name : |
Mr. Hitendra Dave |
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Designation : |
Head of Global Markets |
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Name : |
Mr. Ganesh Bharadhwaj |
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Designation : |
Head of Personal Financial Services |
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Name : |
Mr. Puneet Chaddha |
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Designation : |
Head of Commercial Banking |
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Name : |
TBC |
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Designation : |
Head of Global Banking |
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Name : |
Mr. Ramnath Krishnan |
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Designation : |
Head of Private Banking |
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Name : |
Mr. Ravi Menon |
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Designation : |
Head of Corporate Strategy and Development |
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Name : |
Ms. Naina Lal Kidwai |
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Designation : |
Country Head and Group General Manager |
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Name : |
Mr. David Boycott |
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Designation : |
Chief Risk Officer |
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Name : |
Mrs. Jasmine Batliwala |
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Designation : |
Head of Legal and Compliance |
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Name : |
Mr. Tanuj Kapilashrami |
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Designation : |
Head of Human Resources |
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Name : |
Mrs. Malini Thadani |
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Designation : |
Head of Group Communications and Coporate Sustainability |
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Name : |
Mrs. Maitri Kumar |
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Designation : |
Head of Marketing |
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Name : |
Mr. Davesh Mathur |
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Designation : |
Chief Technology and Services Officer |
BUSINESS DETAILS
|
Line of Business : |
Banking Activities |
GENERAL INFORMATION
|
No. of Employees : |
Information declined by the management |
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Bankers : |
Reserve Bank of |
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Facilities : |
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Banking
Relations : |
-- |
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Auditors : |
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Name : |
S. R. Batliboi and Associates Chartered Accountants |
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Parent Company : |
The Hongkong and Shanghai Banking Corporation Limited, Hongkong |
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Ultimate Holding Company: |
HSBC Holding Plc Address: 8, Tel No.: + 44 (0) 20 - 79918888 |
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Fellow Subsidiaries : |
·
HSBC Bank plc ·
Hang Seng Bank Limited ·
HSBC Bank Brasil S.A – Banco Multiplo ·
HSBC Global Resourcing (UK) Limited ·
HSBC Securities and Capital Markets (India)
Private Limited ·
HSBC Asset Management (India) Private Limited ·
HSBC Pragati Finance (India) Private Limited ·
HSBC Financial Holdings (India) Private Limited ·
HSBC Consumer Services (India) Private Limited, ·
HSBC Professional Services (India) Private
Limited ·
HSBC Electronic Data Processing India Private
Limited ·
HSBC Operations and Processing Enterprise (India)
Private Limited ·
HSBC Private Equity Management (Mauritius)
Limited (Liaison office) ·
HSBC Software Development (India) Private Limited
·
HSBC Global Shared services (India) Private
Limited ·
HSBC Bank of Middle East ·
HSBC Bank Canada ·
HSBC Private Banking Holdings (Suisse) SA ·
HSBC Republic Bank (UK) Limited ·
HSBC Bank Malaysia Berhad ·
Marine Midland Bank (HSBC Americas Inc) ·
HSBC Trinkaus and Burkhardt AG ·
British Arab Commercial Bank Limited ·
HSBC Bank Mauritius Limited ·
HSBC Bank Australia Limited ·
HSBC Bank Argentina S.A. ·
HSBC Bank Egypt S.A.E. ·
SB HSBC Bank Kazakhistan JSC ·
HSBC Bank International Limited ·
HSBC France ·
HSBC InvestDirect (India) Limited ·
HSBC InvestDirect
Securities (India) Limited ·
Investsmart Financial Services Limited ·
HSBC InvestDirect Distribution Services (India)
Limited ·
HSBC InvestDirect Sales and Marketing (India)
Limited ·
IL and FS Investsmart Asia Pacific Private
Limited ·
HSBC InvestDirect Academy for Insurance and
Finance (India) Limited ·
KP Corporate Solutions Limited ·
Investsmart Insurance Agency Private Limited ·
Peregrine Capital India Private Limited ·
HSBC InvestDirect Employee Welfare Trust. |
CAPITAL STRUCTURE
CAPITAL ACCOUNT
As on 31.03.2011
|
Particulars |
Rs. In Millions |
|
I. Amount of deposit kept with the Reserve
Bank of |
15913.356 |
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II. Capital |
|
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Opening Balance |
44991.660 |
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Add: Capital Infusion by Head Office |
0.000 |
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Total |
44991.660 |
FINANCIAL DATA
[all figures are
in Rupees Millions]
ABRIDGED BALANCE
SHEET
|
Particulars |
31.03.2011 |
31.03.2010 |
31.03.2009 |
|
|
|
|
|
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Amount of Deposits kept with Reserve Bank of |
15913.356 |
13933.356 |
10783.356 |
|
|
|
|
|
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Capital |
44991.660 |
44991.660 |
44991.660 |
|
Reserve and Surplus |
91883.062 |
76360.692 |
67151.465 |
|
Deposits |
541067.115 |
557478.247 |
499702.753 |
|
Borrowings |
50263.098 |
59208.139 |
84684.459 |
|
Other Liabilities and Provisions |
183279.813 |
166297.148 |
249673.529 |
|
TOTAL |
911484.748 |
904335.886 |
946203.866 |
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Cash and Bank Balances with
Reserve Bank of |
48578.316 |
39716.165 |
37123.770 |
|
Balances with Banks and money at call and short notice |
33543.694 |
41823.856 |
75202.428 |
|
Investments |
372790.845 |
412890.656 |
311538.200 |
|
Advances |
274006.211 |
234747.670 |
275886.858 |
|
Fixed Assets |
8744.309 |
8928.756 |
8353.196 |
|
Other Assets |
173821.373 |
166228.783 |
238099.414 |
|
TOTAL |
911484.748 |
904335.886 |
946203.866 |
|
|
|
|
|
|
Contingent Liabilities |
9911193.025 |
8509535.228 |
8147158.513 |
|
Bills for collection |
93972.842 |
89817.220 |
84293.895 |
PROFIT & LOSS
ACCOUNT
|
Particulars |
31.03.2011 |
31.03.2010 |
31.03.2009 |
|
|
|
|
|
|
INCOME |
|
|
|
|
Interest earned |
51949.586 |
51658.815 |
63269.285 |
|
Other Income |
17886.488 |
21354.836 |
26994.218 |
|
TOTAL |
69836.074 |
73013.651 |
90263.503 |
|
|
|
|
|
|
EXPENDITURE |
|
|
|
|
Interest expended |
18591.228 |
19146.572 |
26610.018 |
|
Operating Expenses |
21909.495 |
19501.215 |
21946.691 |
|
Provision and contingencies |
14059.416 |
26266.735 |
28793.982 |
|
TOTAL |
54560.139 |
64914.522 |
77350.691 |
|
|
|
|
|
|
Net profit for the year |
15275.935 |
8099.129 |
12912.812 |
|
Profit brought forward |
15468.006 |
9264.515 |
1377.429 |
|
TOTAL |
30743.941 |
17363.644 |
14290.241 |
|
|
|
|
|
|
APPROPRIATIONS |
|
|
|
|
Less: |
|
|
|
|
Transfer to statutory reserve |
3818.984 |
2024.782 |
3228.203 |
|
Transfer to investments reserve |
297.636 |
(335.667) |
335.667 |
|
Transfer to specific reserve |
213.348 |
206.523 |
84.427 |
|
Transfer to capital reserves |
7797.478 |
-- |
1377.429 |
|
Balance carried over to balance sheet |
18616.495 |
15468.006 |
9264.515 |
|
TOTAL |
30743.941 |
17363.644 |
14290.241 |
LOCAL AGENCY FURTHER INFORMATION
Background
The financial statements for the year ended 31 March 2011 comprise the accounts of the India Branches of The subject, which is incorporated and registered in Hong Kong Special Administrative Region (‘SAR’). Subjects ultimate holding company is HSBC Holdings plc, which is incorporated in the United Kingdom.
Basis of
Operations:
The financial statements are prepared and presented under the historical
cost convention and accrual basis of accounting, except where otherwise stated,
and in accordance with the generally accepted accounting principles and
statutory provisions prescribed under the Banking Regulation Act, 1949,
circulars and guidelines issued by the Reserve Bank of India (‘RBI’),
Accounting Standards (‘AS’) prescribed by the Companies (Accounting Standards)
Rules, 2006, to the extent applicable and current practices prevailing within
the banking industry in India.
Capital Adequacy
The Bank’s capital management framework is shaped by the structure,
business model and strategic direction. There is a continuing need to focus on
the effective management of risk, and commensurate capital to bear that risk.
The Bank carefully assesses its growth opportunities relative to the capital
available to support them, particularly in light of the economic environment and
advent of Basel II. The Bank maintains a strong discipline over capital
allocation and ensuring that returns on investment cover capital costs.
Contingent
Liabilities:
|
Particulars |
31.03.2011 Rs.
In Millions |
31.03.2010 Rs.
In Millions |
|
I. Claims against the bank not acknowledged as debts (including tax
matters) |
3357.697 |
2601.885 |
|
II. Liability for partly paid investment |
0.500 |
0.500 |
|
III. Liability on account of outstanding forward exchange and
derivative contracts |
|
|
|
i) Forward contracts |
2373890.362 |
1720866.759 |
|
ii) Currency Options |
498424.118 |
639915.776 |
|
iii) Derivative Contracts |
6731215.046 |
5897369.547 |
|
Total
(III) |
9603529.526 |
8258152.082 |
|
IV. Guarantees given on behalf of constituents |
|
|
|
i) In |
74941.027 |
77440.849 |
|
ii) Outside |
16961.594 |
14167.165 |
|
Total
(IV) |
91902.621 |
91608.014 |
|
|
|
|
|
V. Acceptances, endorsements and other obligations |
174405.885 |
142008.741 |
|
VI. Bills rediscounted |
0.001 |
0.001 |
|
VII. Other items for which the bank is contingently liable |
37996.795 |
15164.005 |
|
TOTAL
(I+II+III+IV+V+VI+VII) |
9911193.025 |
8509535.228 |
Fixed Assets:
·
Freehold Land
·
Premises
·
Leasehold Improvement
·
Computers and Softwares
AS PER WEBSITE DETAILS
History:
The HSBC Group has an international pedigree which is
unique. Many of its principal companies opened for business over a century ago
and they have a history rich in variety and achievement.
Foundation and growth
The HSBC Group is named after its founding member,
The Hongkong and Shanghai Banking Corporation Limited, which was established in
1865 in Hong Kong and
The inspiration behind the founding of the Bank was Thomas Sutherland, a Scot
who was then working as the Hong Kong Superintendent of the Peninsular and
Oriental Steam Navigation Company. He realised that there was considerable
demand for local banking facilities both in Hong Kong and along the
Throughout the late nineteenth and the early twentieth centuries, the Bank
established a network of agencies and branches based mainly in
During the Second World War the Bank was forced to close many branches and its
head office was temporarily moved to
The making of the modern HSBC Group
The post-war political and economic changes in the
world forced the Bank to analyse its strategy for continued growth in the
1950s. The Bank diversified both its business and its geographical spread
through acquisitions and alliances. However, it remained committed to its historical
markets and played an important part in the reconstruction of
In 1959 the bank completed two important purchases, those of The British Bank
of the
In 1965 the Bank purchased a controlling interest in Hang Seng Bank, which had
been established in
During the 1980s the Bank concentrated on moving into those markets where it
was not yet fully represented. Hongkong Bank of
HSBC Holdings plc, the parent company of the HSBC Group, was established in
1991 with its shares quoted on both the
The acquisition in July 1992 of Midland Bank in the
The 1990s have seen further expansion and consolidation of the various
businesses of the HSBC Group. In the
Profile:
The HSBC Group is one of the world's largest
banking and financial services organisations. The Group has around 9,500
offices in 86 countries and territories in Europe, the Asia-Pacific region, the
Subject provides a comprehensive range of financial services through four
customer groups and global businesses: Personal Financial Services (including
consumer finance); Commercial Banking; Corporate, Investment Banking and
Markets; and Private Banking. The HSBC Group Fact Sheet gives an overall view
of the Group's global services. Established in Hong Kong in March 1865 and in
Fact sheets detailing the Group's operations in Hong Kong and mainland
Find out how HSBC fulfills its obligations to customers, shareholders and
employees in HSBC Sustainability Report 2008 (English).
Commercial Banking
The Hongkong and Shanghai
Banking Corporation Limited (HSBC)
Personal Banking
Subject offers a wide range of personal financial services, including personal
lending and deposit products, through its branch network in Ahmedabad,
Non Resident Indian Banking
Subject’s Non Resident Indian Banking (NRI) centres located in Asia-Pacific,
the Middle East, Europe and
Financial Planning Services
Services include investment and custodian management and access to stock
broking and insurance services, which are offered to resident as well as
non-resident Indians.
Corporate Banking
Subject has well-established, long-term corporate banking relationships with
large domestic Indian corporations and foreign multinationals operating in
Business Banking
Subject’s Extra Mile Business Banking offers two
types of account to small and medium-sized businesses - The Business Account and
the BusinessVantage Account. Services include Business Phone Banking, Business
Doorstep Banking and Multi Branch Business Banking.
Payments and Cash Management
Subject provides integrated domestic and regional transaction support to
corporate clients through a sophisticated range of cash management solutions,
including collection and payment services and integration with customer
back-end systems. Operations and client services are ISO 9001 certified.
Hexagon, the HSBC Group's dedicated electronic banking service allows users to
perform financial transactions, obtain international financial markets
information, and review details of their domestic and international accounts,
from anywhere in the world, 24 hours a day.
Trade (international and domestic) and Factoring Services
A wide range of solutions tailored to meet
customer's requirements for both domestic and international businesses is
offered. HSBC is also one of the leading banks involved in the bullion business
through its offices in Ahmedabad,
Institutional Banking
Working closely with Group offices in India and overseas, trade services,
payments and cash management, treasury and capital markets, custody and
clearing, and correspondent and electronic banking activities are offered to
banks, financial institutions, securities houses, insurance companies, asset
management companies and other non-banking companies, non-government and
development organisations operating in India.
Treasury and Capital Markets
Clients consistently rate HSBC's Treasury business as one of the best in
Custody and Clearing
The leading custodian in Asia, HSBC's custody and clearing services are
available in 28 markets in Asia-Pacific and the
Technology
The HSBC Group develops and applies advanced
technology to the efficient and convenient delivery of banking and related
financial services. In
·
Self-Service Banking with over
150 in-branch and off-branch ATMs and 24-hour Phone Banking.
·
Trade and Corporate Banking
services with real-time access to a centralised information database
·
Instantaneous inter-city
transactions through online connections between all branches
·
A state-of-the-art treasury
dealing system
·
A sophisticated card system
supporting debit and credit cards, domestic and international VISA, MasterCard,
and co-branded cards
·
A dedicated acquiring system
for both MasterCard and Visa transactions
·
online@hsbc, HSBC's internet
banking service, provides customers with an integrated and secure platform to
access their accounts.
·
Internet Payment Gateway
handles credit card transactions on the internet
Asset Management
HSBC Asset Management (India)
Private Limited provides a comprehensive
range of investment management solutions to a diverse client base and is
committed for aiming to deliver consistent investment performance, world-class
service and a broad range of solutions for all types of investors. The range of
offerings in
HSBC Global Resourcing
HSBC Global Resourcing is the largest, captive,
banking and financial services off shoring organization in the world. A vital
part of the HSBC Group's global strategy, Global Resourcing plays a key role in
delivering shareholder value and seamlessly integrates and helps the Group
remain competitive in the ever changing world of banking and finance. Global
Resourcing is present in
Insurance
HSBC Insurance Brokers (
Data Processing
HSBC Operations and Processing
HSBC Group Entities in
Private Equity
HSBC Private Equity Management
(
Audit Service
HSBC Professional Services
(India) Private Limited provides internal audit services
to the HSBC Group's internal audit units worldwide, with particular emphasis on
the IT, Treasury, Asset Management, Private Banking and Insurance functions.
Investment Banking
HSBC Securities and Capital
Markets (
Software Development
HSBC Software Development (
HSBC InvestDirect (India) Limited (HIDL) with its headquarters in Mumbai, has a pan-India presence and through
its subsidiaries, offers a range of products & web based services that
include Stock Broking Services, Investment Advisory, Distribution of Financial
products and Securities related financing (NBFC), to individuals and
corporates.
PRESS RELEASE:
US
DOCUMENTS ALLEGE MASSIVE MONEY LAUNDERING AT HSBC
NEW
YORK | MAY 3, 2012
In April 2003, the Federal Reserve Bank of New York and New York state bank regulators cracked the whip on HSBC Bank USA, ordering it to do a better job of policing itself for suspicious money flows. Staff in the bank's anti-money laundering division, according to a person who worked there at the time, flew into a "panic."
The U.S. unit of London-based HSBC Holdings Plc quickly rallied. It hired a tough federal prosecutor to oversee anti-money laundering efforts. It installed monitoring systems for operations that had grown unwieldy during the bank's U.S. expansion. The aim, as HSBC said in an agreement with regulators at the time, was to "ensure that the bank fully addresses all deficiencies in the bank's anti-money laundering policies and procedures."
Nearly a decade later, the effort has failed to satisfy law-enforcement officials.
The extent of that failure is laid out in confidential documents reviewed by Reuters that originate from investigations of HSBC's U.S. operations by two U.S. Attorneys' offices.
These documents allege that from 2005, the bank violated the Bank Secrecy Act and other anti-money laundering laws on a massive scale. HSBC did so, they say, by not adequately reviewing hundreds of billions of dollars in transactions for any that might have links to drug trafficking, terrorist financing and other criminal activity.
In some of the documents, prosecutors allege that HSBC intentionally flouted the law. The bank created an operation that was a "systemically flawed sham paper-product designed solely to make it appear that the Bank has complied" with the Bank Secrecy Act and is able to detect money laundering, wrote William J. Ihlenfeld II, U.S. Attorney for the Northern District of West Virginia, in a draft of a 2010 letter addressed to Justice Department officials.
In that letter, Ihlenfeld compared HSBC unfavorably to Riggs Bank. In 2004 and 2005, that scandal-plagued Washington bank was fined a total of $41 million after it was found to have violated anti-money laundering laws, and it was acquired by PNC Financial Services.
"HSBC is to Riggs, as a nuclear waste dump is to a municipal land fill," Ihlenfeld wrote.
The allegations laid out in the Ihlenfeld letter and other documents couldn't be confirmed. It is possible that subsequent inquiries have led investigators to alter their views of what went on inside HSBC's compliance operation.
As they are, the documents reviewed by Reuters, combined with regulatory filings, court documents and interviews with current and former HSBC employees, paint a damning portrait of a bank allegedly unable, and unwilling, to police itself or its clients.
HSBC's U.S. anti-money laundering division - the people charged with ensuring that the bank toes the line of regulators and law enforcement - has experienced high turnover among executives. Since 2005, at least half a dozen overseers have come and gone. Compliance staff also encountered pushback from bankers eager to maintain relationships with lucrative clients whose dealings raised red flags.
In the Miami office - an important center for HSBC's private-banking and retail operations - a longtime private banker was fired for alleged sexual harassment after he warned compliance officers that clients were engaged in shady dealings.
In one email exchange submitted as evidence in that case, employees debated whether the bank should help a Miami client get around U.S. sanctions by moving the client's business to HSBC's Hong Kong office. "I believe that the best outcome would be for the customer to open a relationship with Hong Kong just for leters (sic) of credit purposes. He travels there all the time," private banker Antonio Suarez wrote in a 2008 email. Suarez has since left the bank and couldn't be reached for comment.
UNDER THE RADAR
The revelations come as HSBC confronts multiple investigations into its internal policing abilities. The Justice Department, the Federal Reserve, the Office of the Comptroller of the Currency, the Manhattan district attorney, the Office of Foreign Assets Control and the Senate Permanent Subcommittee on Investigations are scrutinizing client activities such as cross-border movements of bulk cash, and transactions linked to Iran and other parties under U.S. economic sanctions, the bank said in a February regulatory filing.
"We continue to cooperate with officials in a number of ongoing investigations," HSBC spokesman Robert Sherman said. "The details of those investigations are confidential, and therefore we will not comment on specific allegations." HSBC said in its February filing that it was likely to face criminal or civil charges related to the probes.
A successful case against HSBC could result in an onerous fine and represent one of the most significant money laundering cases ever brought against an international bank. It also would draw unaccustomed attention to the challenges governments -- and financial institutions -- face in monitoring the trillions of dollars flowing through banks' back-office operations, flows essential to the daily functioning of the global financial system.
"Disguised in the trillions of dollars that is transferred between banks each day, banks in the U.S. are used to funnel massive amounts of illicit funds," Jennifer Shasky Calvery, head of the Justice Department's Asset Forfeiture and Money Laundering Section, said in congressional testimony on organized crime in February.
In response to Reuters inquiries about the investigations, Gary Peterson, chief compliance officer of HSBC's U.S. bank operations, said: "Since joining HSBC in 2010, I've been proud to lead an AML (anti-money laundering) team that has vastly increased investments in people, systems and expertise. We are continuously seeking to strengthen our core AML mission: to detect and deter money laundering and terrorist financing - and our efforts are showing results."
To date, the only enforcement action detailing any anti-money laundering shortcomings at HSBC was a 2010 consent order from the Office of the Comptroller of the Currency, the Treasury agency that is HSBC's chief regulator. The OCC, calling HSBC's compliance program "ineffective," told the bank to conduct a review to identify suspicious activity. This "look-back" was expected to yield a report to HSBC and regulators. The status of the report isn't known. A spokesman for the OCC declined to comment.
The West Virginia U.S. Attorney's probe of HSBC, which ran from 2008 until at least 2010, originated in a case against a local pain doctor who allegedly used HSBC accounts to launder ill-gotten gains from Medicare fraud. Over time, the U.S. Attorney's office began to discern that, as Ihlenfeld wrote in his letter, the doctor's case was just "the tip of the iceberg" in terms of the volume of suspicious money sluicing through HSBC.
The U.S. attorney for the Eastern District of New York in Brooklyn - one of the most powerful prosecutors outside of Justice Department headquarters in Washington - has conducted a parallel investigation, in collaboration with the Justice Department's money laundering section.
Specifics on the investigations have until now been cloaked in secrecy. The documents reviewed by Reuters for the first time fill in some of the details. Taken together, they depict apparent anti-money laundering lapses of extraordinary breadth. Among them, according to the documents:
* The bank understaffed its anti-money laundering compliance division and hired "gullible, poorly trained, and otherwise incompetent personnel." In 2009, the OCC deemed a senior compliance official at HSBC to be incompetent - the same executive in charge of implementing a new anti-money laundering system.
* HSBC failed to review thousands of internal anti-money laundering alerts and generate legally required suspicious activity reports, or SARs, on transactions picked up by the bank's internal monitoring system. SARs are important because they are sent to U.S. law enforcement and scrutinized for leads to criminal activity. In May 2010, the bank's backlog of alerts was nearly 50,000 and "growing exponentially each month," according to one of the documents.
* Hundreds of billions of dollars moved unchecked each year through various bank operations because of lax due diligence and monitoring of accounts with foreign correspondent banks, which are financial institutions that rely on U.S. banks for processing services. The bank maintained accounts with "high risk" affiliates such as "casas de cambios" - Mexican foreign-exchange dealers - widely suspected of laundering drug-trafficking proceeds, and some Mexican and South American banks.
* In some instances, "management intentionally decided" not to review alerts of suspicious activity. An investigation summary also says, "There appear to be instances where Bank employees are misrepresenting" data sent to senior managers, and where management altered risk ratings on certain clients so that suspect transactions didn't set off alarms.
Sherman, the HSBC spokesman, said the bank cleared the backlog of alerts and has remained current. Sherman also said the bank "regularly reviews risk ratings. We have revised and strengthened our country risk rating review policies."
Spokesmen for the U.S. Attorney in Wheeling, West Virginia, and for the U.S. Attorney in Brooklyn declined to comment. The Justice Department in Washington also declined to comment, citing "an ongoing investigation into this matter."
THE MIAMI CONNECTION
HSBC was born in 1865 as the Hongkong and Shanghai Banking Corp in the then-British colony of Hong Kong. It had little presence in the U.S. market until its purchase in the 1980s of Marine Midland Banks Inc based in Buffalo, New York.
Now the fifth-largest bank in the world in terms of market
value, HSBC had $2.6 trillion in assets at the end of 2011 and operations in 85
countries and territories. Its North American business, which includes HSBC
Bank
In 1999, HSBC's U.S. unit paid $10 billion to buy Republic New York Corp and a European affiliate, banks controlled by Lebanese financier Edmond Safra. The deal doubled HSBC's private bank to 55,000 clients with $120 billion in assets and broadened business in New York, Florida, Latin America and Europe.
The purchase also yielded one of the world's biggest banknote businesses, an operation that handles bulk cash exchanges between central banks and large commercial banks. In 2003, HSBC plunged into the U.S. market for subprime lending, paying $14 billion for Household International Inc.
By then, all banks faced U.S. regulatory pressure aimed at stopping shady money flows. In the wake of the September 11, 2001, attacks, the Patriot Act took effect, attempting, among other things, to choke off terrorist financing by strengthening requirements that banks look for and report suspicious activity. In recent years, U.S. law enforcement added an emphasis on money tied to the illegal drug trade.
When the 2003 order came down from regulators for HSBC to improve its anti-money laundering efforts, the bank had no centrally organized means of monitoring the movement of money across borders. That's when it hired Teresa Pesce. Pesce came from the high-profile U.S. Attorney's office in Manhattan, where she made a name for herself as a tough prosecutor overseeing money laundering prosecutions.
Pesce "knew the ropes," according to a person who worked in compliance at the time, and the sense among many staffers was that a "savior was here." One of her first initiatives was to order the installation of the Customer Account Monitoring Program, or CAMP, a technology system designed to filter suspicious retail transactions across HSBC's U.S. operations.
In 2006, regulators lifted their 2003 order, according to people familiar with the situation.
Pesce left the bank in 2007 to run KPMG LLP's anti-money laundering consulting business. A lawyer for Pesce declined to comment.
Despite Pesce's efforts, problems with HSBC's program persisted. In 2009, the OCC determined that Lesley Midzain, a compliance executive with little direct experience running anti-money laundering programs, was incompetent. She was in charge of the installation of a monitoring program to replace Pesce's CAMP system, which the OCC had determined was "inadequate to support the volume, scope and nature of international money transfer transactions," according to the documents reviewed by Reuters.
"Ms. Midzain is an experienced compliance professional who worked tirelessly to improve the (anti-money-laundering) systems and processes already in place when she began her assignment in April 2008," said a spokesman for Midzain.
The former compliance-division staffer said that in the
Those observations mesh with allegations in a 2010 lawsuit
against HSBC brought by Tomas Benitez, a longtime private banker in South
Florida who had worked at Republic Bank. Benitez alleged that HSBC fired him in
January 2009 after he warned colleagues that clients had violated
HSBC said in a court filing that it fired Benitez for alleged sexual harassment - allegations Benitez denied.
In court documents, Benitez alleged that during an audit meeting in 2008, an unidentified federal bank examiner told HSBC employees that a client referred to only as "CM" "had multiple affiliations whose ties to Iran and Cuba were part of their ordinary course of business."
At a follow-up meeting, the account was discussed because of indications its owner "was funneling large amounts of funds in and out, with no apparent business purpose," Benitez alleged. He told Clara Hurtado, director of anti-money laundering compliance at HSBC's private bank in Miami, that the account had ties to Iran and Cuba and "as a result, it should not be maintained," according to the lawsuit.
After the meeting, Benitez alleged, another banker said "he would not allow Benitez's word and suspicions to defeat a million-dollar-plus account relationship." The account wasn't terminated, Benitez alleged.
Hurtado declined to comment. She left HSBC in 2009, according to her LinkedIn account.
In an email exchange submitted as an exhibit in the lawsuit, Hurtado and other HSBC employees discussed whether the bank could help a Miami client avoid violating U.S. sanctions by issuing letters of credit for the client from the bank's Hong Kong offices, according to Benitez's lawsuit. "Clara, we are persuing (sic) another solutions......(anything but losing the account!!!)," Suarez, the private banker, wrote in an email. The banker suggested issuing the letters of credit through Hong Kong.
In January 2009, HSBC fired Benitez. In late 2010, a federal judge dismissed his case and demand for pay, saying there was no evidence of a connection between Benitez's concerns about the accounts and the firing. The judge didn't address Benitez's allegations about illicit transactions.
Benitez's Miami lawyer, Mark Raymond, declined to comment on his client's behalf.
HSBC spokesman Sherman declined to comment on Benitez's case. "It's inappropriate to comment on unsubstantiated allegations in termination of employment cases," he said.
OBVIOUS TO STOOGES
Around the time Benitez was sounding warnings in Miami, authorities were accelerating an investigation in West Virginia of Barton Adams, a pain clinic operator in the Ohio River town of Vienna. In 2008, the U.S. Attorney in Wheeling indicted Adams on 157 counts of alleged healthcare fraud and other crimes. They allege that Adams moved hundreds of thousands of dollars in Medicare fraud proceeds between a U.S. HSBC account and HSBC accounts in Canada, Hong Kong and the Philippines.
Adams has pleaded not guilty.
In building their case against him, the West Virginia prosecutors determined that HSBC's compliance problems were systemic. As Ihlenfeld wrote in his letter to the Justice Department: "The Adams money laundering practices - which Moe, Larry, and Curly would dismiss as too transparent - would not be detected by HSBC regardless of who the customer was, or where any transaction occurred." HSBC, he said, "systematically and egregiously" violated the Bank Secrecy Act.
One document reviewed by Reuters says HSBC developed a "large appetite for risk" after snapping up business with Mexican foreign-exchange houses formerly handled by Wachovia Corp. In 2010, Wachovia agreed to pay $160 million as part of a Justice Department probe that examined how drug traffickers had moved money through the bank.
West Virginia prosecutors focused much of their attention, according to the documents, on HSBC's failure to report suspicious activity on hundreds of billions of dollars in business from "high-risk" sources.
For instance, 73 percent of accounts with foreign correspondent banks were rated "standard" or "medium" risk and thus weren't monitored at all, the documents say, noting that oversight of such accounts was "extremely limited despite indications of possible terror financing." In one example, the bank "summarily cleared as many as 5,000" internal alerts of suspicious activity from correspondent customers in Argentina after lowering the country's risk rating.
Investigators cited a litany of failings in the bank's back-office operations -- the vast but mundane business of clearing transactions by moving big sums of money around the globe. In the bank's "remote deposit capture" business - an operation that electronically zaps checks around the world -- HSBC "failed to detect, review and report large volumes of sequentially numbered traveler's checks" from non-U.S. sources. Such checks are a red flag signaling possible money laundering, regulators have said.
HSBC also repatriated more than $106.5 billion in banknote deposits through foreign correspondent accounts, many of them in Mexico and South America, in a three-year period. And yet, "since 2005, the bank has filed only 19 suspicious activity reports relative to the receipt of bulk cash and banknote activities."
People familiar with HSBC and the reports said 19 is a low number given the risk of the clients. Between 2005 and 2010, banks and other depository institutions filed more than 3.8 million SARs, according to the Financial Crimes Enforcement Network, a bureau of the Treasury Department.
Similarly, investigators found that HSBC didn't report any suspicious activity after Drug Enforcement Administration agents posing as drug dealers deposited millions of dollars in Paraguayan banks and then transferred the money to accounts in the U.S. through HSBC. They have also been examining connections between one of the Paraguayan banks and Hezbollah, the Lebanon-based Islamist group classified by the U.S. as a terrorist organization. HSBC has since ended its relationship with the Paraguayan bank, according to government documents.
Ultimately, the U.S. Attorney's office in West Virginia entered into plea negotiations with HSBC, the documents show. A person familiar with the investigation said a deal could have resulted in one of the largest settlements ever in a bank money laundering case.
For reasons that aren't clear, prosecutors in West Virginia were told to stand down while the Eastern District of New York and other Justice Department divisions continued to investigate, according to a Justice Department document and an HSBC regulatory filing. The West Virginia probe could ultimately prove to be a narrow slice of a broader case if criminal or civil charges emerge.
CMT REPORT (Corruption, Money Laundering & Terrorism]
The Public Notice information has been collected from various sources
including but not limited to: The Courts,
1] INFORMATION ON
DESIGNATED PARTY
No records exist designating subject or any of its beneficial owners,
controlling shareholders or senior officers as terrorist or terrorist
organization or whom notice had been received that all financial transactions
involving their assets have been blocked or convicted, found guilty or against
whom a judgement or order had been entered in a proceedings for violating
money-laundering, anti-corruption or bribery or international economic or
anti-terrorism sanction laws or whose assets were seized, blocked, frozen or
ordered forfeited for violation of money laundering or international
anti-terrorism laws.
2] Court Declaration :
No records exist to suggest that subject is
or was the subject of any formal or informal allegations, prosecutions or other
official proceeding for making any prohibited payments or other improper
payments to government officials for engaging in prohibited transactions or
with designated parties.
3] Asset Declaration :
No records exist to suggest that the property or assets of the subject are
derived from criminal conduct or a prohibited transaction.
4] Record on Financial
Crime :
Charges or conviction
registered against subject: None
5] Records on Violation of
Anti-Corruption Laws :
Charges or investigation
registered against subject: None
6] Records on Int’l
Anti-Money Laundering Laws/Standards :
Charges or
investigation registered against subject: None
7] Criminal Records
No
available information exist that suggest that subject or any of its principals
have been formally charged or convicted by a competent governmental authority
for any financial crime or under any formal investigation by a competent
government authority for any violation of anti-corruption laws or international
anti-money laundering laws or standard.
8] Affiliation with
Government :
No record
exists to suggest that any director or indirect owners, controlling
shareholders, director, officer or employee of the company is a government
official or a family member or close business associate of a Government
official.
9] Compensation Package :
Our market
survey revealed that the amount of compensation sought by the subject is fair
and reasonable and comparable to compensation paid to others for similar
services.
10] Press Report :
No press reports / filings exists on
the subject.
CORPORATE GOVERNANCE
MIRA INFORM as part of its Due Diligence do provide comments on
Corporate Governance to identify management and governance. These factors often
have been predictive and in some cases have created vulnerabilities to credit
deterioration.
Our Governance Assessment focuses principally on the interactions
between a company’s management, its Board of Directors, Shareholders and other
financial stakeholders.
CONTRAVENTION
Subject is not known to have contravened any existing local laws,
regulations or policies that prohibit, restrict or otherwise affect the terms
and conditions that could be included in the agreement with the subject.
FOREIGN EXCHANGE RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.55.34 |
|
|
1 |
Rs.86.55 |
|
Euro |
1 |
Rs.67.95 |
INFORMATION DETAILS
|
Information
Gathered by : |
SBA |
|
|
|
|
Report Prepared
by : |
BSN |
SCORE & RATING EXPLANATIONS
|
SCORE FACTORS |
RANGE |
POINTS |
|
HISTORY |
1~10 |
9 |
|
PAID-UP CAPITAL |
1~10 |
9 |
|
OPERATING SCALE |
1~10 |
9 |
|
FINANCIAL CONDITION |
|
|
|
--BUSINESS SCALE |
1~10 |
9 |
|
--PROFITABILIRY |
1~10 |
9 |
|
--LIQUIDITY |
1~10 |
9 |
|
--LEVERAGE |
1~10 |
9 |
|
--RESERVES |
1~10 |
9 |
|
--CREDIT LINES |
1~10 |
9 |
|
--MARGINS |
-5~5 |
-- |
|
DEMERIT POINTS |
|
|
|
--BANK CHARGES |
YES/NO |
NO |
|
--LITIGATION |
YES/NO |
NO |
|
--OTHER ADVERSE INFORMATION |
YES/NO |
NO |
|
MERIT POINTS |
|
|
|
--SOLE DISTRIBUTORSHIP |
YES/NO |
NO |
|
--EXPORT ACTIVITIES |
YES/NO |
NO |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
NO |
|
--OTHER MERIT FACTORS |
YES/NO |
YES |
|
TOTAL |
|
80 |
This score serves as a reference to assess SC’s credit risk
and to set the amount of credit to be extended. It is calculated from a
composite of weighted scores obtained from each of the major sections of this
report. The assessed factors and their relative weights (as indicated through
%) are as follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
RATING EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit transaction.
It has above average (strong) capability for payment of interest and
principal sums |
Large |
|
56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Capability to overcome financial difficulties seems comparatively below
average. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
NB |
New Business |
- |
|
This report is issued at your request without any
risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or
its officials.