HSBC has reviewed lending policies after $400 million fraud hit, chairman says
By Lawrence White
HSBC's Response to Major Fraud Provision
LONDON, May 8 (Reuters) - HSBC has "substantially completed" a review of its lending policies and practises after it took a $400 million provision against a fraud in its UK business, Chairman Brendan Nelson told shareholders on Friday.
Details of the Fraud Provision
The bank reported the unexpected charge, which sources told Reuters was linked to the collapse of British mortgage lender Market Financial Solutions, along with its first-quarter results on Tuesday.
Internal Review and Lessons Learned
"We have been looking at other facilities of a similar nature to see to what extent there are lessons to be learned," Nelson told shareholders, adding that so far the bank has determined the issue to be a one-off rather than anything systemic.
Implications for the Private Credit Market
HSBC's potential loss was the latest sign of stresses in the $3.5 trillion private credit market, which has ballooned in recent years and more recently attracted scrutiny from regulators following some high-profile losses and questions about the opacity of the sector.
Shareholder Concerns and Market Reaction
Shareholders questioned the bank's risk management and lending procedures at its annual shareholder meeting in London on Friday, days after the lender's shares fell 6% when it announced the surprise fraud hit.
Possibility of Recovering Funds
HSBC may yet recover some of the money, Nelson said.
"We haven't booked a loss yet, at the moment it is just a provision, there is a long way to go before we determine the actual amount lost," Nelson said.
Details on the Company Involved
The bank has declined to comment on the identity of the company which triggered the loss, but two sources told Reuters on Tuesday it was related to the bank's exposure to MFS via Apollo Global Management-linked unit Atlas SP.
Comments from Involved Parties
A spokesperson for Atlas declined to comment on Tuesday.
(Reporting by Lawrence White; Editing by Tommy Reggiori Wilkes)
