[PART A] 1.0 2.

0 INTRODUCTION OPERATION

HSBC has its world headquarters at 8 Canada Square in Canary Wharf, London. HSBC has a significant presence in each of the world's major financial markets, with the Americas, Asia Pacific and Europe each representing around one third of its business. HSBC is the largest bank in Hong Kong and prints most of Hong Kong's local currency in its own name. As of 2 April 2008, according to Forbes magazine, HSBC was the fourth-largest bank in the world by assets (with $2,348.98 billion), the second largest in terms of revenues (with $146.50 billion) and the largest in terms of market value (with $180.81 billion). It was also the most profitable bank in the world with $19.13 billion in net income in 2007 (compared to Citigroup's $3.62 billion and Bank of America's $14.98 billion in the same period). Since the end of 2005, HSBC has been rated the largest banking group in the world by Tier 1 capital. In February 2008, HSBC was named the world's most valuable banking brand by The Banker magazine. HSBC is known for a conservative and risk-averse approach to business a company tradition going back to the 19th century. This reputation has been brought into question in the 21st century. In its technical management, however, HSBC has recently suffered a series of headline-making incidents in which some customer data were allegedly leaked or simply went missing. Although the consequences turned out to be small, the embarrassing effect on the group's image did not go unnoticed. HSBC is currently audited by one of the Big Four auditors, KPMG. The HSBC and KPMG headquarters are adjacent to one another, with KPMG occupying 15 Canada Square. HSBC Main Building, Hong Kong is also adjacent to KPMG office located in Prince's Building. A decision on 2 August 2013 made public that PricewaterhouseCoopers will take on the HSBC audit in 2015.

Page | 1

2.1

Principal Subsidiaries

2.1.1 Asia Pacific

i.

HSBC Bank Armenia HSBC Bank Australia Limited The Hongkong and Shanghai Banking Corporation Ltd Hang Seng Bank Ltd HSBC Bank (China) Company Ltd HSBC Bank Malaysia Berhad HSBC Bank Philippines Ltd HSBC Bank A.S. HSBC BANK INDIA

ii.

iii.

iv.

v.

vi.

vii.

2.1.2 Europe

i.

HSBC France HSBC Trinkaus und Burkhardt AG

ii.

iii.

HSBC Bank International

Page | 2

The offshore banking arm of the HSBC Group, focusing on providing offshore solutions and cross border services to expatriates and migrants. It provides a full range of multi-currency personal banking services to a range of customer segments, including a full internet banking and telephone banking service. Sometimes referred to as "HSBC Offshore", the business also offers independent financial planning, and has representative offices all over the world, often working alongside local HSBC operations in those regions. HSBC Bank International originated from the business started by Midland Bank and is based in the Channel Islands with further operations on the Isle of Man. Its operations in the Channel Islands are centred around its headquarters on the seafront in St Helier, Jersey.

iv.

HSBC Bank Malta plc HSBC Private Bank (UK) Ltd HSBC Bank plc

v.

vi.

2.1.3 Americas HSBC Bank Argentina SA HSBC Bank Brazil SA HSBC Bank Chile HSBC Bank Colombia SA HSBC Mexico SA HSBC El Salvador HSBC Paraguay HSBC Per

i.

ii.

iii.

iv.

v.

vi.

vii.

viii.

Page | 3

ix.

HSBC Uruguay HSBC Bank Canada HSBC Bank USA Inc HSBC Finance Corporation

x.

xi.

xii.

2.1.4 Middle East and North Africa

i.

HSBC Bank Middle East Ltd HSBC Bank Egypt SAE The Saudi British Bank

ii.

iii.

2.2

Principal Business Groups and Divisions

HSBC organises its customer-facing activities within four business groups: Commercial Banking; Global Banking and Markets (investment banking); Personal Financial Services (retail banking and consumer finance); and Global Private Banking. 2.2.1 Commercial Banking HSBC provides financial services to small, medium-sized and middle-market enterprises. The group has more than 3 million of such customers, including sole proprietors, partnerships, clubs and associations, incorporated businesses and publicly quoted companies. 2.2.2 Global Banking and Markets Global Banking and Markets is the investment banking arm of HSBC. It provides investment banking and financing solutions for corporate and institutional clients, including corporate banking, investment banking, capital markets, trade services, payments and cash

Page | 4

management, and leveraged acquisition finance. It provides services in equities, credit and rates, foreign exchange, money markets and securities services, in addition to asset management services. Global Banking and Markets has offices in more than 60 countries and territories worldwide, and describes it as "emerging markets-led and financing-focused". Global Banking and Markets is currently being led by former fixed-income trader Samir Assaf, who was promoted from global head of markets on 10 December 2010. 2.2.3 Global Private Banking HSBC Private Bank is the marketing name for the private banking business conducted by the principal private banking subsidiaries of the HSBC Group worldwide. HSBC Private Bank, together with the private banking activities of HSBC Trinkaus, known collectively as Group Private Banking, provides services to high net worth individuals and their families through 93 locations in some 42 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. As of December 2007, profits before tax were US$1,511 million and combined client assets under management were US$494 billion. In September 2008, HSBC announced that it would combine its two Swiss private banks under one brand name in 2009, with HSBC Guyerzeller and HSBC Private Bank to be merged into one legal entity, under the newly appointed CEO of HSBC Private Bank, Alexandre Zeller. 2.2.4 Retail Banking and Wealth Management HSBC provides more than 100 million customers worldwide with a full range of personal financial services, including current and savings accounts,mortgage loans, car financing, insurance, credit cards, loans, pensions and investments. Retail Banking and Wealth Management was previously referred to as Personal Financial Services. This rename was announced during HSBC's 2011 Investor Day. 2.2.5 Group Service Centres

Page | 5

As a cost-saving measure HSBC is offshoring processing work to lower cost economies in order to reduce the cost of providing services in developed countries. These locations take on work such as data processing and customer service, but also internal software engineering at Pune (India),Bangalore (India), Hyderabad (India), Vishakhapatnam (India), Calcutta (India), Guangzhou (China), Curitiba (Brazil) and Kuala Lumpur (Malaysia). Chief Operating Officer Alan Jebson said in March 2005 that he would be very surprised if fewer than 25,000 people were working in the centres over the next three years: I dont have a precise target but I would be surprised if we had less than 15 (global service centres) in three years time. He went on to say that each centre cost the bank from $20m to $30m to set up, but that for every job moved the bank saves about $20,000 (10,400). Trades unions, particularly in the UK and US, blame these centres for job losses in developed countries, and also for the effective imposition of wage caps on their members. Currently, HSBC operates centres out of eight countries, including Brazil (Curitiba), the Czech Republic (Ostrava), India (Calcutta, Hyderabad, Bangalore, Visakhapatam, Bombay, Gurgaon and Pune), China (Shanghai, Guangzhou and Shenzen), Malaysia (Kuala Lumpur), Poland (Krakow), Sri Lanka (Rajagiriya) and the Philippines (Manila). The Malta trial for a UK high value call centre has resulted in a growing operation that country. An option under consideration is reported to be a processing centre in Vietnam to access the French skills of the population and therefore cut costs in the banks French operations. 3.0 FINANCIAL PERFORMANCE 3.1 Financial Report HSBC Bank Malaysia Berhad Year 2012 DIRECTORS REPORT FOR THE YEAR ENDED 31 DECEMBER 2011 The directors have pleasure in submitting their report and the audited financial statements of HSBC Bank Malaysia Berhad (the Bank) and its subsidiaries (the Group) for the year ended 31 December 2012. Principal Activities The principal activities of the Group are banking and related financial services, which also include Islamic banking operations. The principal activities of the subsidiary companies are as disclosed in Note 14 to the financial statements. There have been no significant changes in these activities during the year.

Page | 6

Dividends Since the end of the previous financial year, the Bank paid a final dividend for the year ended 2011 of RM1.747per ordinary share less tax at 25% amounting to RM300 million as proposed in the previous year's directors' report. The dividend was paid on 5 April 2012. The Bank also paid an interim dividend of RM1.164 per ordinary share less tax at 25% amounting to RM200 million in respect of financial year 2012 on 28 September 2012. The directors now recommend a final dividend of RM1.747per ordinary share less tax at 25% amounting to RM300million in respect of the current financial year. This dividend will be recognised in the subsequent financial period upon approval by the owner of the Bank. Reserves and Provisions There were no material transfers to or from reserves or provisions during the financial year under review except as disclosed in the financial statements. Other statutory information Before the financial statements of the Group and of the Bank were finalized, the directors took reasonable steps to ascertain that: i) all known bad debts have been written off and adequate provision made for doubtful debts, and ii) any current assets which were unlikely to be realised in the ordinary course of business have been written down to an amount which they might be expected so to realise. In the opinion of the directors, the financial performance of the Group and of the Bank for the financial year ended 31December 2012 has not been substantially affected by any item, transaction, or event of a material and unusual nature, nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

Page | 7

Business Strategy during the Year 2012 Malaysias GDP growth for 2012 continues to be spurred by robust domestic and private consumption, effectively mitigating against negative spillovers from weaknesses in the external environment. The governments efforts through the Economic Transformation Programme (ETP) have contributed to sustainable economic growth within the country. The Malaysian financial services industry in particular, despite facing both macroeconomic pressures and regulatory changes, still recorded strong growth in both loans and deposits. It is against this backdrop and the intensified competition from existing and new competitors alike that the Group delivered an outstanding performance, achieving the highest profit before tax in history as it continues to remain strong in liquidity, capital strength, cost discipline, relationship-banking, product innovation and global distribution capabilities. RAM Ratings Services Berhad has reaffirmed HSBC Bank Malaysia Berhad (the Bank) and its wholly owned subsidiary, HSBC Amanah Malaysia Berhads (HSBC Amanah) AAA/P1 ratings, reflecting the Group's robust asset quality and strong financial standing. The Bank maintained its market leader position in various segments and won numerous awards in 2012. Amongst the awards won are: HSBC Bank Malaysia 1. Best Bank In Malaysia - The Asset Triple A Country Awards (10th consecutive year) 2. Best Debt House - The Asset Triple A Country Awards (6th consecutive year) 3. Best Domestic Cash Management Bank - Euromoney (Euromoney Cash Management Poll) (6th consecutive year) 4. Best Foreign Commercial Bank - Finance Asia ( 9th consecutive year) 5. Best Foreign Bank - Alpha Southeast Asia (4th consecutive year) HSBC Amanah 1. Best Sukuk House 2012 - Euromoney 2. Most Innovative Deal (Axiata RMB Sukuk) - Euromoney 3. Best Islamic Finance Bank in South East Asia - Alpha Southeast Asia 4. Best Project Financing (Tanjung Bin Energy USD2.1 Billion Senior Loan) - Asia Money 5. Best Islamic Finance Deal (Axiata RMB Sukuk) - Finance Asia 6. Project Bond of the Year (Tanjung Bin Energy MYR 3.29 Billion Sukuk) - PFI Awards 7. Best Sovereign Sukuk (Government of Malaysia US2 Billion Dual Tranche Global Sukuk) The Asset Triple A Asian Awards

Page | 8

8. Islamic Deal of the Year - (Government of Malaysia US2 Billion Dual Tranche Global Sukuk) The Asset Triple A Asian Awards 9. Best Islamic Deal Malaysia - (Government of Malaysia US2 Billion Dual Tranche Global Sukuk) The Asset Triple A Asian Awards 10. Best International Islamic Bank Euromoney 11. Outstanding Contribution to Islamic Finance Award - (Government of Malaysia Wakala Global Sukuk Berhad) Euromoney The Retail Banking and Wealth Management (RBWM) segment has seen significant additions in the range and diversity of wealth and asset management products and services offered during the year. The launch of the HSBC Fund Navigator, an online unit trust fund analytical tool to aid customers in making informed investment decisions is the first amongst retail banks in Malaysia, and a testament of the Groups commitment to develop products and solutions in response to market trends and in support of our customers personal and business needs.

Page | 9

Page | 10

Page | 11

Page | 12

Page | 13

Page | 14

3.2

Financial Report HSBC Bank Malaysia Berhad Year 2011

DIRECTORS REPORT FOR THE YEAR ENDED 31 DECEMBER 2011 The directors have pleasure in submitting their report and the audited financial statements of HSBC Bank Malaysia Berhad (the Bank) and its subsidiaries (the Group) for the year ended 31 December 2011. Principal Activities The principal activities of the Group are banking and related financial services, which also include Islamic banking operations. The principal activities of the subsidiary companies are as disclosed in Note 14 to the financial statements. There have been no significant changes in these activities during the year

Dividends Since the end of the previous financial year, the Bank paid a final dividend for the year ended 2010 of RM1.456 per ordinary share less tax at 25% amounting to RM250 million as proposed in the previous year's directors' report. The dividend was paid on 29 March 2011. The Bank also paid an interim dividend of RM1.164 per ordinary share less tax at 25% amounting to RM200 million in respect of financial year 2011 on 8 September 2011. The directors now recommend a final dividend of RM1.747 per ordinary share less tax at 25% amounting to RM300 million in respect of the current financial year. This dividend will be recognised in the subsequent financial period upon approval by the owner of the Bank. Reserves and Provisions There were no material transfers to or from reserves or provisions during the financial year under review except as disclosed in the financial statements.

Page | 15

Other statutory information Before the statements of financial position and statements of comprehensive income of the Group and of the Bank were finalised, the directors took reasonable steps to ascertain that: i) all known bad debts have been written off and adequate provision made for doubtful debts, and ii) any current assets which were unlikely to be realised in the ordinary course of business have been written down to an amount which they might be expected so to realise. At the date of this report, the directors are not aware of any circumstances: i) that would render the amount written off for bad debts, or the amount of provision for doubtful debts, in the financial statements of the Group and of the Bank inadequate to any substantial extent. ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Bank misleading, or iii) which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Bank misleading or inappropriate, or At the date of this report, there does not exist: i) any charge on the assets of the Group or of the Bank that has arisen since the end of the financial year and which secures the liabilities of any other person, or ii) any contingent liability in respect of the Group or of the Bank that has arisen since the end of the financial year other than in the ordinary course of business. No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may affect the ability of the Group and of the Bank to meet their obligations as and when they fall due. In the opinion of the directors, the financial performance of the Group and of the Bank for the financial year ended 31 December 2011 has not been substantially affected by any item, transaction, or event of a material and unusual nature, nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

Page | 16

Business Strategy during the Year 2011 The Malaysian financial services industry, supported by healthy local consumer demand and robust government and private investment activities, recorded a strong growth in both loans and deposits despite the uncertainty of the global economy. Amidst this backdrop, the Group delivered a very strong performance, achieving the highest profit before tax in history. The Group remains strong in liquidity, capital strength, cost discipline, relationshipbanking, product innovation and global distribution capabilities. RAM Ratings Services Berhad has reaffirmed HSBC Bank Malaysia Berhads (the Bank) AAA/P1 ratings, reflecting the Bank's robust asset quality and strong financial standing. Similarly, HSBC Amanah Malaysia Berhad ("HSBC Amanah"), the Banks wholly owned subsidiary was also assigned ratings of AAA/P1 in its inaugural credit rating exercise during the year. The Bank maintained its market leader position in various segments and won various awards in 2011. Amongst the awards won are: 1. Best Islamic/Most Innovative Islamic Finance Deal of the Year in Southeast Asia (Government of Malaysias USD1.2 Billion & USD800 Million Wakala Global Sukuk. HSBC was Joint Lead Managers and Joint Bookrunners) Alpha Southeast Asia 2. Best Debt House The Asset Triple A Country Awards 3. Best Bank The Asset Triple A Country Awards 4. Best Foreign Commercial Bank Finance Asia 5. Best Foreign Bank Alpha Southeast Asia 6. Best Corporate / Institutional Internet Banking Global Finance (Country Awards) 7. Best Fund Administrator, Retail Funds - The Assets 2011 Triple A Securities and Fund Services awards 8. Best Cash Management Bank in Malaysia Euromoney (Euromoney Cash Management Poll) The Group is committed to developing products and solutions in response to market trends and has expanded its rangeof market related products and services accordingly. The Bank capitalised on its debt capital market leadership to secure key deals, and once again asserted its market leadership position among foreign banks in the debt capital markets by maintaining its position as the No.1 foreign bookrunner for Malaysian Ringgit bonds and Islamic bonds for the fifth consecutive year. In 2011, the Group continued to expand its branch and delivery network with the opening of 2 additional conventional branches and 7 additional Islamic branches, bringing its total branch network to 57 branches (42 conventional, 15 Islamic). The Group also joined the Malaysian Electronic Payment System (MEPS), a shared automatic teller machine (ATM)

Page | 17

network with more than 10,000 ATMs nationwide. The Group's approach to sustainability is about managing its business successfully, profitably and for the long term. At HSBC Malaysia, our investment in the community is primarily focused on education and the environment because we believe they provide the fundamental building blocks for the development of the society. The Group endeavours to contribute towards changing people's lives and the environment they live in for the better, and encourages active participation from our colleagues in all corporate sustainability initiatives.

Page | 18

Page | 19

Page | 20

Page | 21

Page | 22

3.3 Financial Report HSBC Bank Malaysia Berhad Year 2010 DIRECTORS REPORT FOR THE YEAR ENDED 31 DECEMBER 2010 The directors have pleasure in submitting their report and the audited financial statements of HSBC Bank Malaysia Berhad (the Bank) and its subsidiaries (the Group) for the year ended 31 December 2010. Principal Activities The principal activities of the Group are banking and related financial services, which also include Islamic banking operations. The principal activities of the subsidiary companies are as disclosed in Note 14 to the financial statements. There have been no significant changes in these activities during the year.

Dividends Since the end of the previous financial year, the Bank paid a final dividend of RM1.456 per ordinary share less tax at 25% amounting to RM250 million as proposed in the previous year's directors' report. The Bank also paid an interim dividend of RM1.164 per ordinary share less tax at 25% amounting to RM200 million in respect of financial year 2010. The directors now recommend a final dividend of RM1.456 per ordinary share less tax at 25% amounting to RM250 million in respect of the current financial year. Reserves and Provisions There were no material transfers to or from reserves or provisions during the financial year under review except as disclosed in the financial statements. Other statutory information Before the statements of comprehensive income and statements of financial position of the Group and of the Bank were finalised, the directors took reasonable steps to ascertain that:

Page | 23

i)

all known bad debts have been written off and adequate provision made for doubtful debts, and

ii)

any current assets which were unlikely to be realised in the ordinary course of business have been written down to an amount which they might be expected so to realise.

At the date of this report, the directors are not aware of any circumstances: i) that would render the amount written off for bad debts, or the amount of the provision for doubtful debts, in the financial statements of the Group and of the Bank inadequate to any substantial extent. ii) iii) that would render the value attributed to the current assets in the financial statements of the Group and of the Bank misleading, or which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Bank misleading or inappropriate, or iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group and of the Bank misleading. In the opinion of the directors, except for those matters disclosed in the financial statements, the financial performance of the Group and of the Bank for the financial year ended 31 December 2010 has not been substantially affected by any item, transaction, or event of a material and unusual nature, nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report. Business Strategy during the Year 2010 2010 has been a year of progressive recovery for the financial services industry. The Group delivered a strong performance, with profit before tax exceeding the RM1 billion mark and is now well on track to resuming pre-crisis level profitability and long term organic growth in all business segments. The Group continued to remain strong in liquidity, capital strength, cost discipline, relationship-banking and global distribution capabilities. Rating Agency Malaysia has reaffirmed HSBC Bank Malaysia Berhads (the Bank) AAA/P1 ratings, reflecting the Bank's robust asset quality and strong financial standing. The Bank maintains

Page | 24

its market leader position in various segments and won various awards in 2010, which included: 1. Best Deal The Asset Triple A Country Awards

(HSBC was joint bookrunner and joint lead manager in the US$1.25 billion Government of
Malaysia Sukuk) 2. Best Debt House The Asset Triple A Country Awards 3. Best Bank The Asset Triple A Country Awards 4. Best Sub-Custodian in Malaysia The Asset Triple A Asian Awards 5. Best Domestic Custodian in Malaysia The Asset Triple A Asian Awards 6. Best Cash Management Bank in Malaysia Euromoney 8. Best Foreign Bank in Malaysia Alpha Southeast Asia 9. Best Foreign Exchange Provider 2010 Global Finance The Group is committed to developing products and solutions in response to market trends and has expanded its range of market related products and services accordingly. As a pioneer sukuk provider, HSBC Amanah Malaysia Berhads (HSBC Amanah) brand name was also used as leverage to expand its market share of the Islamic global markets business. The Bank capitalised on its debt capital market leadership to secure key deals, and once again asserted its market leadership position among foreign banks in the debt capital markets by maintaining its position as the No.1 foreign bookrunner for Malaysian Ringgit bonds and Islamic bonds for the fourth consecutive year. Retail banking experienced intensified competition from both new and existing competitors and a decline in cards issuance due to the introduction of the credit card service tax in late 2009. However, robust growth in domestic consumption and the normalisation of interest rates allowed retail banking to grow in strength. In 2010, the Group focused on expanding its investment and insurance product range and the Premier and Advance proposition for both the conventional and Islamic banks. HSBC Amanah was awarded the Best Foreign Islamic Bank in Malaysia by Alpha Southeast Asia, a testament to its commitment in providing a comprehensive and innovative range of Islamic financing products and services. HSBC Amanah opened 4 more branches in 2010, bringing its total branch network to 8, in addition to launching its own version of Amanah Premier and Advance, which offers globally linked up banking services with Shariah compliant financial solutions.

Page | 25

In commercial and corporate banking, the Group continues to capitalise on the competitive advantage offered by its international network and connectivity. There is an increased emphasis on building stronger alignment among domestic business segments and with HSBC offices worldwide. During the year, the Group successfully launched One HSBC Account Opening module in Malaysia. The One HSBC initiative is a re-engineering process to place HSBC Group offices worldwide onto a single global system or platform and is part of HSBC Groups strategy in managing costs and improving efficiencies by promoting direct chanels, automating manual processes and eliminating redundant systems. The Group also continues to make a significant commitment to corporate sustainability (CS) through a focus on three major areas: Environment, Education and Community. The Group contributed to various educational, community and charity programmes during the year, including sponsoring NGOs on environmental research projects

Page | 26

Page | 27

Page | 28

Page | 29

Page | 30

4.0

EVENTS

Sir Thomas Jackson became chief manager in 1876. During his twenty-six year tenure, the Bank became a leader in Asia. Notable events included being the first bank established in Thailand in 1888, where it printed the country's first banknotes acting as banker for the Hong Kong government from the 1880s; and participating in the management of British colonial government accounts in China, Japan, Penang and Singapore. A period of expansion followed, with new branch offices opening in Bangkok (1921), Manila (1922) and Shanghai (1923), and a new head office building in Hong Kong in 1935. In anticipation of the Japanese invasion of Hong Kong in 1941, the Bank's head office moved to London. During the period 1941-1943 the chief manager Sir Vandeleur Gray burn, and his successor David C Edmondson, both died while interned by the Japanese. Arthur Morse was appointed Chief Manager in 1943 and led the bank after the war. The head office moved back to Hong Kong in 1946. During the Japanese occupation the Bank's head office building was occupied as the headquarters of the Hong Kong Japanese military government Michael Turner became Chief Manager in 1953 and set about diversifying the business. His tenure came to an end in 1962 having established The Hong Kong and Shanghai Banking Corporation of California 1955 and having acquired The British Bank of the Middle East and theMercantile Bank (based in India) in Aug 1959. Turner was succeeded in 1962 by Jake Saunders. In 1964 the Chief Managership was superseded as the top executive role in the bank by an Executive Chairmanship. Saunders took this role until retirement in 1972 and was succeeded as Chief Manager in 1964 by H.J. Shen, the managing director of Maysun Trading Co. and the former head of the Central Trust of China, who became the first ethnic Chinese to be appointed to the position of Chief Manager of the bank. Under Saunders' tenure the bank continued to expand. 1965 saw the bank purchase a controlling interest in Hang Seng Bank of Hong Kong, and 1972 the formation of a merchant banking arm, Wardley Limited. In 1980, the Bank launched a hostile takeover bid for the Royal Bank of Scotland, although the bid was blocked by the British government. In 1980, the Bank, now under the chairmanship of Michael Sandberg, acquired a 51% stake in Marine Midland Bank, of the United States of America, and continued its expansion with the establishment of Hongkong Bank of Canada (now HSBC Bank Canada) in 1981 andHongkongBank of Australia Limited (now HSBC Bank Australia Limited) in 1986. 1987, under the Chairmanship of William Purves, saw the bank's ownership of Marine Midland

Page | 31

Bank increased to 100% and the acquisition of a 14.9% share in Midland Bank in the United Kingdom. The present building in Hong Kong was designed by Sir Norman Foster and was held as one of the most expensive and technologically advanced buildings in the world in 1986, costing HK$5.3 billion. In 1991, the London-based HSBC Holdings plc was established as a parent company for the group; shares are traded on the London, Hong Kong, Paris, New York and Bermuda stock exchanges. Asia Pacific Operations (Start Of Operations) Bangladesh HSBC started operations in 1996. The bank primarily focuses on urban areas and has branches in most areas of the capital city of Dhaka, it also has branches in the cities of Chittagong and Sylhet. The bank also has a good number of ATM booths in the cities present, it also has booths in most five star hotels. HSBC Bangladesh is rated AAA in the Long-term and ST-1 rating in the Short-term, which are the highest level of ratings for any bank or financial institution in Bangladesh. HSBC Bangladesh offers a comprehensive range of financial services such as commercial banking, consumer banking, payments and cash management, trade services, treasury, and custody and clearing. The bank also offers offshore banking in the Export Processing Zones, this is only limited to investors in the EPZs. A special service called NRB Services is also available for nonresident Bangladeshis, this service allows consumers to maintain accounts in US Dollars, Pound Sterling and Euros. People using this service can freely remit money from Bangladesh to any part of the world and can access their money from any HSBC booth around the world. HSBC Bangladesh has a help center which operates on a daily basics. It is one of the very few banks in the country to offer day night banking. It also has begun to support education initiatives for people with disabilities; the bank recently partnered with the Blind Education and Rehabilitation Development Organization to give scholarships to people with blindness.

China HSBC established its Shanghai branch office on 3 March 1865 and has had a continuous presence in the city since then, except during the Japanese Occupation. Until the economic

Page | 32

reforms of the late 1970s, its activities were mainly in inward remittances and export bills, however its activities now span a wider range. On 6 August 2004, HSBC announced that it would pay USD 1.75 billion for a 19.9% stake in Shanghai-based Bank of Communications. At the time of the announcement, Bank of Communications was China's fifth-largest bank and the investment by HSBC was eight times bigger than any previous foreign investment in a Chinese bank. The industry considered this move, giving HSBC a lead in the race to grab pieces of mainland China's banking market. A year earlier, HSBC had joined with Hong Kong's Shanghai Commercial Bank to purchase an 11% stake in Bank of Shanghai (HSBC paid USD 62.6 million for an 8% stake) and USD 733 million for a 10% stake in Ping An Insurance. In 1 April 2007, the mainland China offices of The Hongkong and Shanghai Banking Corporation transferred to its subsidiary HSBC Bank (China), and it started operations in 2 April. In January 2013, Wendy Yuen (Head of Corporate & Commercial Banking and Sales Management, Hang Seng Bank, an HSBC subsidiary) and her friend certified public accountant Alice Wong (YY Chui & Company) refused to pay tuition fees for their then 8year-old daughters, primary 3 pupils at Diocesan Girls Junior School in Jordan, Kowloon, Hong Kong. In addition, Wendy Yuen and Alice Wong cyber attacked the tutor for more than 8 months, making it impossible for the tutor to find work. As of today, the debt and lost income have not been paid. Hang Seng Bank representatives refused to intervene or address the bad credit history of Wendy Yuen, a senior employee, saying it was a personal matter. India In 1959 HSBC acquired The Mercantile Bank of India, London and China, established in October 1853 in Bombay (now Mumbai). HSBC is now one of the fastest growing foreign banks in India, both in domestic banking and support operations for worldwide operations (seeGroup Service Centres).

Indonesia The Hongkong and Shanghai Banking Corporation opened its first Indonesian office in Jakarta in 1884. Having been able to restart its operations after the Second World War, it was again forced to close in mid-1960s, however the Bank was granted a new banking

Page | 33

licence in 1968 its operations have grown to make it one of the largest foreign banks operating in Indonesia. Japan HSBC opened its first Japan operations in Yokohama in 1866, followed by branches in other trading ports such as Osaka, Kobe andNagasaki. It was heavily involved in the early development of Japan's current monetary system, and consulted with the government regarding fiscal policy, currency printing and related matters. HSBC does not conduct ordinary retail banking in Japan, but conducts investment banking in Tokyo and Osaka. Since 2007 it has expanded its HSBC Premier private banking services for the "Mass affluent" market or high net worth individual clients. HSBC Premier has seven Premier one in Kobe. In December 2011, HSBC announced to selling its private bank in Japan to Swiss peer Credit Suisse for an undisclosed sum, but at the end of October 2011 the value of the gross assets included in the sale was about $2.7 billion. It was a strategy to cut $3.5 billion annual costs by quiting businesses or countries where it lacks scale which Credit Suisse has a larger business in Japan than HSBC and in line with a global business restructuring it announced that will see it cut 30,000 jobs as it pares back small or inefficient operations. New Zealand HSBC's operations in New Zealand are as a branch of The Hongkong and Shanghai Banking Corporation, which first gained a licence from the Reserve Bank of New Zealand on 22 July 1987. Today HSBC offers a range of financial products from a network of 9 offices. Philippines HSBC's history in the Philippines dates back more than 130 years with the establishment of their first branch in Binondo, Manila in 1876. In its early years of operation, HSBC serviced the booming Philippine sugar industry. At the turn of the century, it financed railways that connected provincial towns across Luzon to Manila. During the American regime, HSBC was called to advise on Philippine currency reform. Its current headquarters are in Fort Bonifacio. Today, HSBC Philippines operates in key Philippine cities such as Cebu and Davao. It has ended Citibank and Standard Chartered's duopoly on international banking in the Philippines. Singapore branches in Japan including centers in the Hiroo, Akasaka, Marunouchi(flagship), Ginza, Yokohama, Ikebukuro, areas of Tokyo and

Page | 34

In Singapore, The Hongkong and Shanghai Banking Corporation Limited operates as a full service bank with its headquarters in Collyer Quay. It opened its doors in December 1877. Today, HSBC's flagship office remains at the original Collyer Quay site where its first branch was opened. Its main office is located at Mapletree Business City in Pasir Panjang, Harbourfront. HSBC Singapore is a Qualifying Full Bank with 11 branches incorporating 5 HSBC Premier Centres and 33 Automated Teller Machines in Singapore and offers a comprehensive range of financial services including commercial banking, investment and private banking, insurance, forfaiting and trustee services, and securities and capital markets services. South Korea HSBC is expanding in competitive South Korean market, operating from a network of 11 branches, the first having been opened in Jemulpo in 1897 . Sri Lanka HSBC has been present in Sri Lanka for 120 years. The Hongkong and Shanghai Banking Corporation Limited established its first branch inColombo Sri Lanka on 1 July 1892, just 27 years after it began operating in Hong Kong and Shanghai. It has established itself as one of the largest and most profitable banks operating in the country. It has achieved leadership in Corporate Banking, Capital Markets and Credit Card issuance. Taiwan HSBCs presence in Taiwan dates back to 1885 when The Hongkong and Shanghai Banking Corporation appointed an agent in Tamsui. A full service branch was established in Taipei in 1984. The bank now has a network of 8 branches (Hyperlink to service channel island-wide, including Taipei, Chien Kuo, Pan Chiao, Tien Mu, Taoyuan, Taichung, Tainan, and Kaohsiung. In 2007, The Hongkong and Shanghai Banking Corporation acquired The Chinese Bank in Taiwan. The acquisition made HSBC's nation-wide branch network increase to 47. Thailand HSBC initially opened for business in Thailand in 1888, becoming the first commercial bank in the country. HSBC has made significant contributions to the establishment of solid foundations for Thailands financial and banking sectors. For example, in 1889 HSBC issued the first banknotes in Thailand. HSBC also issued the first foreign loan to the Thai government for its railroad construction project. HSBC's main branch office in Thailand is

Page | 35

situated in Bangkok on Rama IV Road opposite Lumpini Park. In 2011, Phase 2 of the new Financial Sector Master Plan allowed foreign banks to open up to two branches in the Kingdom of Thailand in preparation for full retail operations. Accordingly, a second branch was opened on Thonglor (Sukhumvit 55) in early 2011. In January 2012 HSBC announced the sale of its Thailand retail banking operations to the Krungsri Group (Bank of Ayudhya) and its intention to maintain only corporate banking business in Thailand. Vietnam In Vietnam, HSBC first opened an office in Saigon (now Ho Chi Minh City) in 1870. In August 1995, HSBC opened a full-service branch in Ho Chi Minh City. In 2005, HSBC also opened its second branch in Hanoi and established a representative office in Can Tho. On 29 December 2005, HSBC acquired 10% share capital of Vietnam Technological and Commercial Joint Stock Bank (Techcombank), one of the largest joint stock commercial banks in Vietnam by equity. In July 2007, HSBC became the first foreign bank to increase its stake in Techcombank to 15%. In September 2008, HSBC completed the increase of its stake in Techcombank to 20%, became the first foreign bank in Vietnam to hold a 20% interest in a domestic bank. In September 2007, HSBC acquired 10% share capital of Bao Viet Holdings, becoming the sole foreign strategic partner of Vietnams leading insurance company. In October 2009, HSBC signed an agreement to increase its shareholding in Bao Viet Holdings to 18% from 10% for VND1.88 trillion (approximately US$105.3 million). On 1 January 2009, HSBC started operating its locally incorporated entity and became the first foreign bank to incorporate in Vietnam, after gaining approval from the State Bank of Vietnam (SBV) to set up a Wholly Foreign-Owned Bank (WFOB) in Vietnam in September 2008.

From Early Establishment To 2013 The Hong Kong and Shanghai Banking Corporation was founded by Scotsman Sir Thomas Sutherland in the then British colony of Hong Kong on 3 March 1865, and in Shanghai one month later, benefiting from the start of trading into China, including opium trading. In 1980, HSBC acquired a 51% shareholding in US-based Marine Midland Bank, which it extended to full ownership in 1987.

Page | 36

HSBC Holdings plc was established in the United Kingdom in 1991 as the parent company to the Hongkong and Shanghai Banking Corporation in preparation for its purchase of the UKbased Midland Bank and the impending transfer of sovereignty of Hong Kong to China. HSBC Holdings' acquisition of Midland Bank was completed in 1992 and gave HSBC a substantial market presence in the United Kingdom. As part of the takeover conditions for the acquisition, HSBC Holdings plc was required to relocate its world headquarters from Hong Kong to London in 1993. Major acquisitions in South America started with the purchase of the Banco Bamerindus of Brazil for $1bn in March 1997 and the acquisition of Roberts SA de Inversions of Argentina for $600m in May 1997. In May 1999, HSBC expanded its presence in the United States with the purchase of Republic National Bank of New York for $10.3bn Expansion into Continental Europe took place in April 2000 with the acquisition of Crdit Commercial de France, a large French bank for 6.6bn. In July 2001 HSBC bought Demir bank, an insolvent Turkish bank. In July 2002, Arthur Andersen announced that HSBC USA, Inc., through a new subsidiary, Wealth and Tax Advisory Services USA Inc. (WTAS), would purchase a portion of Andersen's tax practice. The new HSBC Private Client Services Group would serve the wealth and tax advisory needs of high net worth individuals. Then in August 2002 HSBC acquired Grupo Financiero Bital, SA de CV, Mexico's third largest retail bank for $1.1bn.[16] In November 2002 HSBC expanded further in the United States. Under the chairmanship of Sir John Bond, it spent 9 billion (US$15.5 billion) to acquire Household Finance Corporation (HFC), a US credit card issuer and subprime lender. In a 2003 cover story, The Banker noted "when banking historians look back, they may conclude that [it] was the deal of the first decade of the 21st century". Under the new name of HSBC Finance, the division was the second largest subprime lender in the US. On 22 November 2001, the Hongkong and Shanghai Banking Corp would provide a fixedrate mortgage to buyers of Cheung Kong (Holdings)' Victoria Towers residential development. The new headquarters of HSBC Holdings at 8 Canada Square, London officially opened in April 2003.[21] In September 2003 HSBC bought Polski Kredyt Bank SA of Poland for $7.8m. In June 2004 HSBC expanded into China buying 19.9% of the Bank of Communications of Shanghai. In the United Kingdom HSBC acquired Marks & Spencer Retail Financial Services Holdings Ltd for 763m in December 2004. Acquisitions in 2005 included Metris Inc, a US credit card

Page | 37

issuer for $1.6bn in August and 70.1% of Dar es Salaam Investment Bank of Iraq in October. In April 2006 HSBC bought the 90 branches in Argentina of Banca Nazionale del Lavoro for $155m. In December 2007 HSBC acquired the Chinese Bank in Taiwan. In May 2008 HSBC acquired IL&FS Investment, an Indian retail broking firm. In 2005 Bloomberg Markets magazine accused HSBC of money-laundering for drug dealers and state sponsors of terrorism. Then-CEO Stephen Green said that This was a singular and wholly irresponsible attack on the banks international compliance procedures, but subsequent investigation indicated that it was accurate and proved that the bank was involved in money laundering throughout Mexico. U.S. Assistant Attorney General Lanny Breuer characterized HSBC compliance during this period as "stunning failures of oversight and worse ... The record of dysfunction that prevailed at HSBC for many years was astonishing. In March 2009, HSBC announced that it would shut down the branch network of its HSBC Finance arm in the U.S., leading to nearly 6,000 job losses and leaving only the credit card business to continue operating. Chairman Stephen Green stated, "HSBC has a reputation for telling it as it is. With the benefit of hindsight, this is an acquisition we wish we had not undertaken. According to analyst Colin Morton, "the takeover was an absolute disaster". Although it was at the centre of the subprime storm, the wider group has weathered the financial crisis of 20072010 better than other global banks. According to Bloomberg, "HSBC is one of worlds strongest banks by some measures". When HM Treasury required all UK banks to increase their capital in October 2007, the group transferred 750 million to London within hours, and announced that it had just lent 4 billion to other UK banks. In March 2009, it announced that it had made US$9.3bn of profit in 2008 and announced a 12.5bn (US$17.7bn; HK$138bn) rights issue to enable it to buy other banks that were struggling to survive. However, uncertainty over the rights' issue's implications for institutional investors caused volatility in the Hong Kong stock market: on 9 March 2009 HSBC's share price fell 24.14%, with 12 million shares sold in the last few seconds of trading. On 11 May 2011 the new chief executive Stuart Gulliver announced that HSBC would refocus its business strategy and that a large-scale retrenchment of operations, particularly in respect of the retail sector, was planned. HSBC would no longer seek to be 'the world's local bank', as costs associated with this were spiralling and US$3.5bn needed to be saved by 2013, with the aim of bringing overheads down from 55% of revenues to 48%. In 2010, then-chairman Stephen Green planned to depart HSBC to accept a government appointment

Page | 38

in the Trade Ministry. Group Chief Executive Michael Geoghegan was expected to become the next chairman. However, while many current and former senior employees supported the tradition of promoting the chief executive to chairman, many shareholders instead pushed for an external candidate. HSBC's board of directors had reportedly been split over the succession planning, and investors were alarmed that this row would damage the company. On 23 September 2010, Geoghegan announced he would step down as chief executive of HSBC. He was succeeded as chief executive of HSBC by Stuart Gulliver, while Green was succeeded as Chairman by Douglas Flint; Flint was serving as HSBC's finance director (chief financial officer). August 2011 Further to CEO Stuart Gulliver's plan to cut $3.5 billion in costs over the next 2 years, HSBC announced that it will cut 25,000 jobs and exit from 20 countries by 2013 in addition to 5,000 job- cuts announced earlier in the year. The consumer banking division of HSBC will focus on the UK, Hong Kong, high-growth markets such as Mexico, Singapore, Turkey and Brazil, and smaller countries where it has a leading market share. According to Reuters, Chief Executive Stuart Gulliver told the media, "There will be further job cuts. There will be something like 25,000 roles eliminated between now and the end of 2013. In August 2011 "to align our U.S. business with our global network and meet the local and international needs of domestic and overseas clients", HSBC agreed to sell 195 branches in New York and Connecticut to First Niagara Financial Group Inc for around $1 billion and announced the closure of 13 branches in Connecticut and New Jersey. The rest of HSBC's U.S. network will only be about half from a total 470 branches before divestments. On 9 August 2011, Capital One Financial Corp. agreed to acquire HSBC's U.S. credit card business for $2.6 billion, netting HSBC Holdings an estimated after-tax profit of $2.4 billion. In September it was announced that HSBC seeks to sell its general insurance business for around $1 billion. In 2012, HSBC was the subject of hearings of the U.S. Senate permanent subcommittee for investigations for severe deficiencies in its antimoney laundering practices. On 16 July the committee presented its findings. Among other things it concludes that HSBC has been transferring $7 billion in banknotes from its Mexican to its US subsidiary, much of it related to drug dealing, was disregarding terrorist financing links and was actively circumventing U.S. safeguards to block transactions involving terrorists, drug lords and rogue regimes, including hiding $19.4 billion in transactions with Iran.

Page | 39

In July 2012 HSBC came under investigation for allegedly assisting in the money laundering of drug dealers and terrorist money for many years, after a probe by the US Federal Reserve and Office of the Comptroller of the Currency found that there was "significant potential for unreported money laundering or terrorist financing". On 11 December 2012, HSBC agreed to pay a record $1.92 billion fine in this money laundering case. "Bank officials repeatedly ignored internal warnings that HSBC's monitoring systems were inadequate, the Justice Department said. In 2008, for example, the CEO of HSBC Mexico was told that Mexican law enforcement had a recording of a Mexican drug lord saying that HSBC Mexico was the place to launder money. The DOJ, however, decided not to pursue criminal penalties, a decision which the New York Times labelled a "dark day for the rule of law. "We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again." HSBC Chief Executive Stuart Gulliver said. In July 2013, Alan Keir was appointed Chief Executive of HSBC Bank plc after Brian Robertson resigned from his post. Keirs duties include overseeing the firms UK, European, Middle Eastern and African divisions.

5.0

OTHERS

HSBC (Hong Kong and Shanghai Banking Corporation) Holding Plc is the worlds largest banking group and sixth world largest company according to Forbes Magazine in 2009. Now it spread its banking business all over the world. HSBC bank was funded in 1865. Now the bank has network of some 10,000 properties in 86 countries around the world. The bank employed 325,000 full time and part time employees all over the world. The bank provides comprehensive range of financial services-personal, commercial, corporate, institutional, investment and private banking clients all over the world. The bank provides financial service to 100 million customers in different regions all over the world. HSBC are held over by 210,000 shareholders in 120 countries. These shares are traded in New York Stock Exchange in the form of American Depository shares. It is listed in London, Hong Kong, New York, Paris and Bermuda stock exchanges. In 2008 the bank made revenue of $137,309,000,000 and its net profit was $6,498,000,000. In 2009 when some of the major banks in the world are in trouble HSBC remain in top form because of its strong foundation.

Page | 40

5.1

Ethical Issues Relating to HSBC

Rights, Conflicts and Responsibilities Rights: HSBC is an employee friendly company. The bank is always notice to the benefit of the employees. Maintaining work, life, balance polices is the main motto of the bank. The employees are openly giving their opinion to their line manager. They can easily take part in the strategy develop meetings. The bank provides world class remuneration and training facilities to their employees. The bank is also providing share options to their employees. The employees participate in various variable play agreements. As a part of the corporate social responsibility the bank employed differently able people. These are the brief description of the rights of the HSBCs employees. Conflicts: It is the right of the employee to give his or her openly to the meeting and in the time of making strategic plan. So there may be some conflicts between the employees in the bank. The bank employed 325,000 employees all over the world. so there may be interbank conflicts. HSBC has more than 210,000 shareholders all over the world. They expect more profit from the bank. So there may be some sort of conflicts between the shareholders and the bank. HSBC is one of the world leading banking corporations of the world. So there may be some conflicts with other banks in terms of banking service, in terms of making profits, in terms of providing profit to their shareholders and in terms of hiring best employees from the market. Responsibilities: The main responsibility of a bank is to keep the customers money save and secure. Invest the money in those sectors which will give the bank highest return. Another main responsibility of eh bank is to provide the highest return to their share holders. HSBC perform all these responsibility very well. They get best award as a best cash management bank in ASIA in 2009. There are no objections about the HSBCs responsibility in the banking industry. Marketing HSBC marketing strategy is very strong they use handsome amount of money for advertising. They know it very well that what should be the marketing strategy in the serving area. They take different types of marketing plans of different area. HSBC banks have 10,000 affiliates all over the worlds in 120 countries. The target customers of the

Page | 41

different country are different. They set their marketing plan and strategy according to their target customers. The bank also sponsors of different social developments programs. Professionalism In 2006 and 2007 the revenue of the bank is in increasing trend but in 2008 due to global recession net income of the bank is going down. But compare to other world class the bank condition and income is very good. According to the Forbes Magazine it is world leading bank of the world. So the bank is the most reliable bank of the world. the bank employed most professional people and who provide the best service to the customers. 5.2 Information Technology

HSBC has a world class IT structure and online banking service. The bank provides online banking services all over the world. One customer of HSBC bank can easily transfer his fund from India to Australia in a minute. The bank also provides ATM and credit card facilities to their customers. The customers who are using internet banking the bank provide special security to them. There accounts are more secured. The customers use their account from their countrys bank website. The customers have to maintain the privacy policy fixed by HSBC bank. Communication Communication means connected with internal employees and external customers and shareholders. Employees of the bank are to share information with their colleagues. They are also free to make contract personally and officially to their colleagues. HSBC arrange different types of cultural programs for their prime customers and colleagues and their family members. In this way HSBC maintain their communication. The bank also sends souvenirs to their customers at different religious and cultural occasions. Freedom of Action Freedom of action means the employees freedom to take any actions. It is the right of the employees to participate in the strategy development meeting and they are free to give their opinion in the meeting. As well as the employee of the bank are free to discuss any topic to their line manager. They are free to provide solution to their customer, which is also a good sign of independency of their customers.

Page | 42

5.3

Censorship on the Internet

It is very important to the customers what kind of information bank share with others. HSBC maintain a very strong privacy policy for their customers. If a customer wants a copy of their privacy policy he or she can easily collect the policy through the mail from the HSBC. In internet they also maintain a very strong censorship policy. Here a customer can get only the information of the products. Only who has the permission of access the account from the online only they can see the information from the internet. So it can be said that HSBC has a good censorship policy for the safety of the customers. 5.4 Computers and Work

All kind of banking transaction of the bank is performing through internet. The bank is maintaining all databases in computer and the employees of the bank perform their task in computer. The bank has a strong computer network all over the world. So they can easily share the information from one country to another in every minute. All kind of financial analysis of the customers is done through computers. The financial experts are done the task. 5.5 Law

When HSBC bank starts banking in a country it is incorporated as a subsidiary company of HSBC holding Plc. In several stock exchange its share are traded as HSBC Holding Plc. It starts banking service as a private bank and follows the rule and regulation of the parent country. The bank follows the international banking law and the bank maintains a strong privacy policy for their customers. 5.6 Security

Security of money is a prime conscious of the customers. If the customers do not fill comfortable they will not deposit their money in the bank. HSBC has 100 million customers all over the world. So HSBC gain the trust of the customers. The customers of the HSBC believe that, their money will remain secure in the bank. The bank experts decide in which sectors they will invest the depositors money that will give the highest return to them. So the shareholders of the bank are secure for their share value.

Page | 43

Another meaning of the security of the bank is to secure information of the customers. HSBC bank has maintained a strong privacy policy for their customers so there is very low chance to publish any kind of information from the bank. As well as the bank has a very strong internet censorship program. So, only registered customers of the bank can access their information from the website. These are all about the ethical practices of the HSBC Bank. So, at the end it can be said that they maintain their ethical issue very strongly. It is another reason of their success in the banking industry. 5.7 Brief Description of Spain

Kingdom of Spain is the official name of Spain. It is located in the southern Europe on the Iberian Peninsula. It is one of the members European Union (EU). Madrid is the capital city of Spain. Official language is Spanish. Parliamentary democracy and Constitutional monarchy is the ruling system of Spain. 504,030 square kilometer is the total area of Spain. Euro is the currency name of Spain. In 2008, 46 million people are living in Spain. According to World Bank it is the ninth largest economy in the world, fifth in the Europe. It is also the third largest world investors. It is business friendly country. The legal system and other legal issue are discussed elaborately in below5.8 The Legal System

Constitutional Status: The Spanish Constitution of 1978 is the foundation of the Spanish transition to democracy. It is a constitutional monarchy. Cortes Generales is the name of its bicameral parliament. Monarch appoints and nominate the executive branch (consists of a Council of Ministers) presided over by the President of Government, it is confirmed by the Congress of Deputies following legislative elections. King Juan Carlos has established political custom since the ratification of the 1978 Constitution; the most popular parties of the who nominated by the king seats in the congress. Origin of Law: The nominated members of the government make the rules and regulation of Spain. According to the 1978 Spain Constitution Spanish Court System is governed by the judicial council. It is free from the domination of the legislative and executive branches of Government.

Page | 44

5.9

Source of Law

Spanish Constitution should be the source of law. But the historical reasons civil code regulates the law of the country. There are three types of law. Thats: law, custom and general principal of law. Spanish legal system is hierarchical. In below the types of law are given. The rank is higher to lower: 5.10 Organic Law Ordinary Law Decree-Law Legislative Decree Regulation International Treaties European Community legislation Court Structure

Spanish court structure is hierarchical. Structure of the Spanish court is given in the next page. Chart 1: Court Structure of Spain I. Supreme Court: The Supreme Court is the highest level of justice in the Spanish system. Though it is based in Madrid but its jurisdiction extends throughout the Spanish territory and over all judicial matters. Supreme Court is divided into five ChambersCivil Criminal Social Militar and Administrative

ii. National Court: National Court has its jurisdiction all over the Spain. It is located in Madrid. It has three chambers. Thats: The Criminal Chamber: the cases involves with royal family, high official, major drug trafficking are deals in the criminal chamber.

Page | 45

The Administrative Chamber: in this chamber hires and apples against ministers and secretaries decision. The Social Chamber: it is bigger than the autonomous committee. It tries the special process for contesting collective bargaining agreements applicable to a territory.

iii. Regional High Court: This is the highest level of justice within each autonomous committee. It is divided in to four chambers: Civil Criminal Administrative Labor

iv. Provincial Court: the provincial court deals with civil and criminal cases. It is located in the capital of province. Its jurisdiction extends throughout the province. It has two portions: Civil Section Criminal Section

v. Tribunals: Tribunal court is divided into three parts: 5.11 Different Forms of Business Allowed to Operate and the Laws Governing Them Spain is a business friendly country. According to World Bank it is the ninth largest economy in the world, fifth in the Europe. It is also the third largest world investors. There are mainly four forms of business organization can be formed in Spain: thats Sole Proprietorship Partnership and Company corporation Central Criminal Court -Administrative Court -CriminalCourt

Page | 46

Partnership business is two kindsLimited Partnership General Partnership Company can be formed in European Public Limited liability company Limited liability company New limited liability company

Spain welcomes all foreign investor to invest in the country. The investor need to meet with some legal requirements to invest in Spain. The legal requirements are - minimum capital, minimum share holder, and to maintain some legal corporate obligation. 5.12 Dispute Resolution Procedure

Arbitration is the only procedure which is follow to solve dispute outside of the court. The procedure is set by the parties in the absence of agreements. The procedure is set by the arbitrators. The exits cases are not the subject of arbitration. 5.13 Laws relating to

Copyrights Spanish copyrights law is set by the Spanish govern. According to the copyright law the author of literacy, the scientific research documents are protected in the law. The law is first installed in January 1879. In the time of origination it was influenced by the French Copyright Law. In 2006 the law was modified and it approved by the Royal Legislative. The law covers the area of all original works of literature, science, art, music, and movie. It is not mandatory that the creator must registered the work but if he registered the work than that person will get some advantages. It is providing prima facie to the creator. Trademarks New trademarks law enforced in 31 July 2002. According to the law if the applicant has no third parties then he will take the rights of the trademarks. If there is any third party also applicant for the same trademarks then none of the parties will get the rights of the trademarks. On the other hand if one party apple for the trademarks earlier than another party then the prior party will get the registration.

Page | 47

Patents Patents right is preserved in Spain by the Patents Act 2002. There is also the Patents Regulations 1953. Royal Legislative is the major persons of patents related issues. Following purposes are served by this act: Administration Pattern Maintaining the patents register. Providing the patents forms and other applications and documents forms. Determining the patterns fees. Receiving the pattern fees. Publish the pattern in the official journal. Registering patent attorneys.

Any Spanish person or any foreign neutral person gets the opportunity to patents his works. Royal Legislative becomes involved in proceedings when an opposition to the grant of an IP right is filed, when a revocation application is made, or when a hearing is requested. A panel of Assistant Commissioners (Hearings Officers) gives decisions on matters referred to the Commissioner for hearing. Designs The Designs Act 2002 is the main law relating to designs in Spain. It is supported by the Designs Regulations 1954. Following purposes are served by the Design Act 2002: Design registers should be maintained. Power and the function of the design should be defined. Design and document should be provided. Determining design fees. Collecting design fees.

Commissioner deal with designs issues in the hearing office and this office is the primary place for judicial cases of deign. Royal Legislative becomes involved in proceedings when a revocation application is made, or when a hearing is requested. A panel of Assistant

Page | 48

Commissioners (Hearings Officers) gives decisions on matters referred to the Commissioner for hearing. Royal Legislative publishes a number of practice guidelines that are used as a reference tool for examiners of designs. They set out procedural and legal matters relevant to the examination of applications of Designs under the Act. 5.14 Development in Information, Communication and Technology

HSBC has a very strong IT structure. The bank provides online banking services to its customers. The bank has a global virtual network. All kind of customers information is maintained in the computer. Development of communication is a major component of the banks. Without time to time development of the communication technology HSBC will not come in this stage. The bank has developed its information, communication technology time to time. Now bank delivers four basic products in its all branches. Internet banking is one of them. HSBC is one of the pioneers in internet banking. Upgradation of communication technology is a regular work of HSBC. Culture According to John D. Daniels, Lee H. Radebaugh and Daniel P. Sullivan states that Culture refers to the learned norms based on attitudes, values, and beliefs of a group of people. In the age of globalization culture play an important role for the multinational organization like HSBC. 325,000 employees in 85 countries work in HSBC. These people have different culture. HSBC shows respect to their culture. They design the organization culture in this way that they can follow the rules and regulation to their own country. These are all about the external environment of the HSBC. Internal environment of HSBC is also very flexible. The employees in the organization are free to make contact with its other colleagues in other country. They can easily share their ideas and point of views with their foreign colleagues and their line managers. HSBC is one of the banks who maintain their work life balance policy very strongly. Flexibility, good training and development program, attractive salary and strong corporate culture are the reasons of HSBC success. Power According to Bloomberg, "HSBC is one of worlds strongest banks by some measures. It is one of the most powerful financial institutions of the world. HSBC is the parent company of

Page | 49

Hong Kong. It plays very important role in Hong Kong economy. So it can be said that it influenced the economic policy in Hong Kong. In US and in UK HSBC is one of the leading banks. It helps the government to make policy that is related to business for foreign country. In South Asia the bank works as foreign multinational bank. They influence the government to making foreign banking policy. In some countries HSBC provide fund to the government or lend money to the government such as- Bangladesh. In these countries bank can easily influence the government to making policy that will help the bank. Politics Political stability is very important for the development of a business organization. It is very good advantage for the HSBC that, the main two countries in US and UK from where they mainly operated its worldwide banking business, have very strong democratic system. The bank operated in 86 countries. All of these countries political system are not same. In some countries political system is very unstable, such as Pakistan. In some countries political power of those countries are not favorable for HSBC. Global political and economic crisis like- World war and world rescission also play very important role in case of multinational company like HSBC. HSBC provides banking services all over the world. Now it is age of communication and technology. So any political crisis of a particular country is not play very important role in the total business of a multinational company. On the other hand it is very good for the HSBC that they did not have to face any major political crisis in the recent decades. Law As a global company it also follows the laws of all countries where it operates. Its local operations are totally controlled according to local banking rules and regulations. HSBC is always respectful to laws because without showing respect on laws it is impossible to be a socially responsible banking institution. In every country where the banks operated its banking services follow the rules set by its central bank. The bank also follows separate law and terms condition for its website and internet banking. HSBC maintain strong privacy rules for their customers. They do not publish any information to other company without permission of the customers. In case of internet banking the bank provide selected

Page | 50

information to the customers. It is the motto of the HSBC that they follow the rules and regulation and the being the social responsible company of the country. Choice People come to the bank mainly for two purposed; one is to deposit their money and other is borrowing fund from the bank. So the banks arrange their products and services according to the customers choice. HSBC provides banking services to 100 million people all over the world. They arrange the products according to the choice if the customers. HSBC respects the customers choice. So, bank diversified the products according to the customers need. The main four products of the HSBC are Personal Financial Service (including commercial finance) Commercial banking Global Banking and Markets and Private Banking

There are also some sub products for the HSBC. So, when customers come to the bank he or she gets services according to his needs.

Page | 51

[PART B] 6.0 MONEY LAUNDERING

Staring out with one small bank HSBC grew into one of the world's most successful and largest banks. The bank was first opened in Hong Kong in March of 1865 with the help of a man named Thomas Sutherland. The bank now consists of four global businesses that include, retail banking and wealth management, commercial banking, Global banking and markets, and Global Private banking. These four global businesses serve 89 million people throughout 85 different countries and 6 different regions. HSBC's headquarters are located in London. In 2012 HSBC was accused of money laundering through mexican drug cartel and other with possible links to terrorist groups. Money laundering is the process of covering up the proceeds of a crime so it cannot be linked to the wrongdoing. It was found that HSBC has been transferring $7 billion in banknotes from its Mexican to its U.S subsidiaries. Much of this $7 billion was drug related. Their failures also went as far as dealing with bank Al Rajhi in Saudi Arabia that was linked to the financing of terrorist groups. The bank failed to monitor $58 trillion of money moving across boarders and through their branches. HSBC now faces 1.9 billion dollars in fines and penalties that they have agreed to pay to avoid more serious consequences. The bank will be on probation for the next 5 years and need to make sure that they do not allow anything like this to happen again. If they fail to follow these conditions then the case can be reopened and criminal indictment can be charged. Under all of the theories which include, individualism, utilitarian, kantianism, and virtue, HSBC is not acting ethically. 6.1 Individualism Theory

Individualism is the moral stance, political philosophy, ideology, or social outlook that emphasizes the moral worth of the individual. Individualists promote the exercise of one's goals and desires and so value independence and self-reliance and advocate that interests of the individual should achieve precedence over the state or a social group, while opposing external interference upon one's own interests by society or institutions such as the government.

Page | 52

Individualism makes the individual its focus and so starts "with the fundamental premise that the human individual is of primary importance in the struggle for liberation. Liberalism, existentialism and anarchism are examples of movements that take the human individual as a central unit of analysis. Individualism thus involves "the right of the individual to freedom and self-realization". It has also been used as a term denoting "The quality of being an individual; individuality related to possessing "An individual characteristic; a quirk." Individualism is thus also associated with artistic and bohemian interests and lifestyles where there is a tendency towards self-creation and experimentation as opposed to tradition or popular mass opinions and behaviors as so also with humanist philosophical positions and ethics.

The individualism theory states that the most important thing is to maximize profit and maximize the well being of the company. However, they need to do so within the limitation of the law and peoples rights. originally HSBC intended to maximize their profits by allowing people to launder money through their bank branches and to make this go unnoticed. However they got caught breaking the law and ended up doing the opposite of maximizing their profits and the company's wellbeing. They ended agreeing to pay 1.9 billion dollars in fines, which was the largest fine to ever be imposed on a bank. Not only will they be losing lot of money but they will also be losing the respect and trust of many people including investors and customers. This is definitely not maximizing the wellbeing of the company. Even though they were attempting to maximize their profits they were doing so by breaking the law which makes what HSBC did unethical by this standard. 6.2 Utilitarian Theory

Utilitarianism is a theory in normative ethics holding that the proper course of action is the one that maximizes utility, usually defined as maximizing happiness and reducing suffering. Classic utilitarianism's two most influential contributors are Jeremy Bentham and John Stuart Mill. John Stuart Mill in his book Utilitarianism, stated, "In the golden rule of Jesus of Nazareth, we read the complete spirit of the ethics of utility. To do as one would be done by, and to love one's neighbor as oneself, constitute the ideal perfection of utilitarian morality." According to Bentham and Mill, Utilitarianism is hedonistic only when the result of an action has no decidedly negative impact on others. It is now generally taken to be a form

Page | 53

of consequentialism, although when Anscombe first introduced that term it was to distinguish between "old-fashioned Utilitarianism" and consequentialism. In utilitarianism, the moral worth of an action is determined only by its resulting outcome, although there is debate over how much consideration should be given to actual consequences, foreseen consequences and intended consequences. In A Fragment on

Government, Bentham says, "it is the greatest happiness of the greatest number that is the
measure of right and wrong" and describes this as a fundamental axiom. In An Introduction

to the Principles of Morals and Legislation, he talks of "the principle of utility" but later
prefers "the greatest happiness principle." Utilitarianism can be characterized as a quantitative and reductionist approach to ethics. It is a type of naturalism. It can be contrasted with deontological ethics, which does not regard the consequences of an act as a determinant of its moral worth; virtue ethics, which primarily focuses on acts and habits leading to happiness; pragmatic ethics; as well as with ethical egoism and other varieties of consequentialism. Utilitarianism is influential in political philosophy. Bentham and Mill believed that a utilitarian government was achievable through democracy. Mill thought that despotism was also justifiable through utilitarianism as a transitional phase towards more democratic forms of governance. As an advocate of liberalism, Mill stressed the relationship between utilitarianism and individualism. The Utilitarian theory believes that companies should try and maximize the happiness of the majority of the people and their stakeholders. They believe that happiness is the most important thing. The stakeholders in the case with HSBC would be the employees, customers and investors of the bank. This theory tells us that we should be able to tell the ethical significance of any action by looking at the consequences. In this case if you look at the consequences you can tell that it is both unethical and the majority of the people are definitely not happy. They had to pay large fines, be on probation, and lost peoples trust. I think its safe to say no one would be happy with an outcome like this. The employees end up unhappy because many of them lost jobs and or bonuses, even people who have been with the company for as much as 20 years got fired or were forced to resign. Customers and investors were not happy because they trusted in the bank and the bank broke the law and was dishonest with many people. Once a company has that attached to them its hard to gain back trust and also get the respect of their new customers and investors. For all of

Page | 54

these reasons the greater number does not end up happy and this scandal is not ethical by this perspective either. 6.3 Kantianism Theory

Kantian ethics is a deontological ethical theory first proposed by German philosopher Immanuel Kant. The theory, developed as a result of Enlightenment rationalism, is based on the view that the only intrinsically good thing is a good will; therefore an action can only be good if its maxim, the principle behind it, is duty to the moral law. Central to Kant's construction of the moral law is the categorical imperative, which acts on all people, regardless of their interests or desires. Kant formulated the categorical imperative in various ways. His principle of universal ability requires that, for an action to be permissible, it must be possible to apply it to all people without a contradiction occurring. His formulation of humanity as an ends in itself requires that humans are never treated merely as a means to an end, but always also as ends in themselves. The formulation of autonomy concludes that rational agents are bound to the moral law by their own will, and Kant's Kingdom of Ends requires that people must act as if the principles of their actions establish a law for a hypothetical kingdom of ends. Kant also distinguished between perfect and imperfect duties. A perfect duty, such as the duty not to lie, always holds true; an imperfect duty, such as the duty to give to charity, can be made flexible and applied in particular times and places. American philosopher Louis Pojman has cited Pietism, political philosopher JeanJacques Rousseau, the contemporary debate between rationalism and empiricism, and the influence of natural law as influences on the development of Kant's ethics. Other philosophers have argued that Kant's parents and his teacher, Martin Knutzen, influenced his ethics. Those influenced by Kantian ethics include philosopher Jurgen Habermas, political philosopher John Rawls, and psychoanalyst Jacques Lacan. German philosopher G.W.F. Hegel criticised Kant for not providing specific enough detail in his moral theory to affect decision-making and for denying human nature. German philosopher Arthur Schopenhauer argued that ethics should attempt to describe how people behave and criticised Kant for being prescriptive. Michael Stocker has argued that acting out of duty can diminish other moral motivations, such as friendship; Marcia Baron has defended the theory by arguing that duty does not diminish other motivations. The Catholic Church has criticised Kant's ethics as contradictory and regards Christian ethics as more compatible with virtue ethics than Kantian ethics.

Page | 55

The claim that all humans are due dignity and respect as autonomous agents means that medical professionals should be happy for their treatments to be performed upon anyone, and that patients must never be treated merely as useful for society. Kant's approach to sexual ethics emerged from his view that humans should never be used merely as a means to an end, leading him to regard sexual activity as degrading and to condemn certain specific sexual practices. Feminist philosophers have used Kantian ethics to condemn practices such as prostitution and pornography because they do not treat women as ends. Kant also believed that, because animals do not possess rationality, we cannot have duties to them except indirect duties not to develop immoral dispositions through cruelty towards them. Kant used the example of lying as an application of his ethics: because there is a perfect duty to tell the truth, we must never lie, even if it seems that lying would bring about better consequences than telling the truth.

The next theory is the Kantianism theory. When talking about this theory there are four basic principles that are involved. These principles are that companies should act rationally, allow and help people to make rational decisions, respect people, and be motivated by good will. HSBC did none of these things. They acted very selfishly and did not make rational choices. It is clearly not rational to allow dangerous people such as drug dealers launder money through their bank. They were not thinking about all of the parties involved or what the consequences could potentially be when they chose to look the other way on this issue. Another part of the Kantianism theory is the three formulas that it consists of. These formulas include, The formula of universal law, the formula of humanity and the formula of autonomy. The formula of universal law states that companies should act only on the maximum whereby you can at the same time will that it becomes universal law. This law prohibits people from making exceptions of themselves. However, that is exactly what HSBC did. They knew money laundering was illegal but made an exception for themselves that is was okay to do so. Therefore this is another theory that HSBC would seem unethical according too.

6.4

Virtue Theory

Virtue ethics emphasizes the role of one's character and the virtues that one's character embodies for determining or evaluating ethical behavior. Virtue ethics is one of the three major approaches to normative ethics, often contrasted to deontology which emphasizes

Page | 56

duty to rules and consequentalism which derives rightness or wrongness from the outcome of the act itself. The difference between these three approaches to morality tends to lie more in the way of how moral dilemmas are approached, rather than in the moral conclusions reached. For example, a consequentialist may argue that lying is wrong because of the negative consequences produced by lyingthough a consequentialist may allow that certain foreseeable consequences might make lying acceptable. A deontologist might argue that lying is always wrong, regardless of any potential "good" that might come from lying. A virtue ethicist, however, would focus less on lying in any particular instance and instead consider what a decision to tell a lie or not tell a lie said about one's character and moral behavior. As such, lying would be made in a case-by-case basis that would be based on factors such as personal benefit, group benefit, and intentions (as to whether they are benevolent or malevolent). A person's character is the totality of his character traits. Our character traits can be good, bad or somewhere in between. They can be admirable or not. The admirable character traits, the marks of perfection in character, are called virtues, their opposites are vices. Character traits are: dispositions or habit-like tendencies that are deeply entrenched or engrained. They have been referred to as second nature--"first nature" referring to tendencies with which we are born. Character traits are not innate--we were not born with them. Thus infants are neither virtuous nor vicious. formed as a result of more or less freely selected actions of a certain kind. We are not born honest or liars, but we become so by repeatedly telling the truth or by repeatedly lying.

Moral Virtues are: are admirable character traits; generally desirable dispositions, which contribute, among other things, to social harmony

Page | 57

Craft knowledge is a technical virtue specific to a particular line of work (rhetoric or the art of effective persuasion, the housebuilder's art, the computer programmer's art, the accountant's art). The moral virtues have a more general scope.

enable us to act in accordance with reason You cannot be morally reasonable in the fullest sense, you cannot have the virtue called prudence, unless you are morally virtuous. The person who is not morally virtuous is sometimes ruled by his or her appetites or passions. Her emotions get in the way of doing the reasonable thing or even recognizing what the reasonable thing might be.

enable us to feel appropriately and have the right intention The person whose character is less than virtuous may do what looks, from the outside, like the right thing to do, but her motives will leave something to be desired. A truthful person will usually tell the truth, and he will do so because it is the right thing to do, not because he fears the negative consequences of being found out.

are orientations towards the mean, rather than the extremes (vices relate to extremes). In Aristotle's famous study of character, a frequent theme is the fact that a virtue lies between two vices. The virtue of courage, for example, lies between the vices of rashness and cowardice. The coward has too much fear, or fear when he should have none. The rash person has too little fear and excessive confidence. The courageous person has the right amount. While courage is the virtue related to the emotions of fear and confidence, mildness

is the virtue related to anger. A person who gets angry too quickly will be irascible; a person who never gets angry, even when she should, is inirascible (the term does not matter). The

Page | 58

virtuous person will get angry when she should, but not excessively and not contrary to reason. Aristotle calls the virtue of appropriate anger mildness or gentleness. HSBC showed that they did not have or use any of these virtues in a positive way in this case. They did the opposite. I guess in a way you could say they had courage because they let these things go on and they broke the law. However, they did not have good courage or courage to stick up for the right thing to do. This theory, like the previous ones would not agree with HSBC and would not accept them or think they were ethical. In my opinion I do not agree with what HSBC did or think that it was ethical by any means. They broke the law and allowed dangerous people to launder money. However I do think that it was respectable for them to apologize and take responsibility for their wring doings. They are taking to right steps to move forward in their business and make sure this doesn't happen again. They formed new management teams and spent extra money on improving their anti-money laundering systems. This goes to show that people and businesses can make mistakes but can also bounce back from them is they do the right things from then on out. This proves how far HSBC has come so far which also shows on how much they will continue to grow in the future.

The action plan for HSBC is actually pretty simple. They allowed money laundering to go on through their bank. They will need to first apologize to the public and pay their fines as well as fire and hire new management teams that will run the company better and more ethical. HSBC's mission statement should be "Our mission is to be one of the biggest and most successful banks in the world, while continuing to grow and develop as well as doing so in a respectful and honest manner. They should also have a set of core values that they run their company by. I think that these core values should be honesty, integrity, ingenuity and hard work. I believe if they follow both these core values and the mission statement then they will be very successful and be able to monitor future issues. If they do all these things and make the appropriate fires/hires and follow their main values then they will be able to ensure ethical productivity. 7.0 7.1 CULTURAL INSENSITIVITY HSBC Embroiled In 'Slit-Eye Row' Over Advert

Page | 59

HSBC has become embroiled in a race row after it dressed up an overweight white man to look like a Japanese sumo wrestler for its latest advert.

HSBC, which calls itself 'the world's local bank', is running a series of billboard and print advertisements featuring the wrestler alongside the slogan: 'Fixed savings rates that won't budge.' The model called Brian, who stars in the bank's commercial with the tag line "Fixed savings rates that won't budge", had his skin darkened and is wearing make-up that makes his eyes look narrower, it has been claimed. He is pictured in a Japanese-style wig and a traditional mawashi belt. The controversy comes after the Spanish Olympic basketball team sparked fury in China after appearing in newspaper adverts posing while making "slit-eyed" gestures. Both the men's and women's teams were pictured smiling as they pulled back the skin on the side of their eyes, in a crude impersonation of Chinese people. Days later a photo showing four members of Argentina's Olympic women's football team pulling the same pose emerged on the internet. Although there was no suggestion that any of the athletes intended to cause offence, the rows sparked by the photos have highlighted how standards about the acceptability of racial stereotyping vary widely between countries, even in the West. Now HSBC, which calls itself "the world's local bank", has been accused by members of Britain's Japanese community of being "culturally insensitive". Godfrey King, director of the Anglo-Japanese Society of Wessex, said: "The fact that the picture depicts a sumo wrestler who is not actually a sumo wrestler, but has been made up to look like one, would be considered a high insult to the Japanese community. It is culturally insensitive.

Page | 60

"It has insulted the honour of our nation." HSBC said that the Sumo wrestler was not meant to look like he came from a specific country but admitted that make-up had been applied to his face and eyes and that his skin tone had been made to appear more tanned. A spokesperson said: "The only make-up and post-production applied is to even up our model's natural suntan from his arms and neck-line all over his body. Sumo wrestlers come from all over the world and the sport is particularly popular in central Europe right now. "It's standard photography make-up - not to alter the ethnicity of the model in any way." Sumo wrestling, which began in a competitive form in the 16th century as a performance to entertain the Shinto gods, is Japan's national sport. It attracts wrestlers from all over the world but the current grand champion is originally from Mongolia. 8.0 A TALE OF TWO LIARS

There were two great liars in a town and the town management decided to organize a competition during the annual fund raising dinner so that the two liars could entertain the crowd and also outwit each other. The first liar boasted that his great grandfather owned the biggest stable in the world where all the worlds animals could be easily accommodated and still there would be ample space. The second liar interrupted and declared that the stable was nothing compared to the unique sword which his great grandfather owned. The sword which easily reached the sky line, was used by his great grandfather every morning to pierce the clouds causing a huge rainfall so that he could take a nice shower. The first liar not to be overshadowed immediately inquired as to where the big sword was stored when not in use. The second liar replied that it was stored in your grandfathers stable. The whole crowd was swept on their feet by the reply. Two legends of todays banking industry one is Sir John Bond, Who is the Chairman of the HSBC Banking Group, which is the largest banking group in the UK. The other is His Excellency Sultan Suwedi, the Governor of UAE Central Bank. Both command enormous power but unfortunately ran into a simple god fearing and straightforward auditor. At one of the breakfast meeting organized by KPMG, Sir John declared that he wears two hats one

Page | 61

as the Chairman of HSBC the giant banking group and the other as the Chairman of the Institute of International Finance in Washington whose members are all top banks in the world. The Bank of Credit and Commerce (BCCI), some 77% owned by the ruler of Abu Dhabi, was penalized heavily for laundering some $ 14.0 million in the U.S. and here HSBC bank launders some $ 343. 0 million in just one bank account and still gets all the banking awards every year. Sultan would have become a hero overnight in the banking world and would have been worshipped like a god in the Arab Banking World. But this glory was not to be his and now finds him self in all sorts of trouble. The banking industry to whom he played a host in September 2003, when the galaxy of bankers from around the globe attended the 58th Annual meeting of the IMF and World Bank in Dubai will face series of questions- Was he bribed by HSBC? If yes, then how much and in what currency and how did they do it? Is he going to go behind the bars? Sultan, who has been the Governer for the last 14 years or so, has more faith in the Hawala system of remittance than his own banking system a very sorry state of affairs, indeed, and has been hosting the International Hawala Conference every year to throw wool in the eyes of banking communities. According to him, Hawala is a very old system of remittance and is justified. Somebody should tell him that prostitution is also the oldest profession, but is banned by most of the civilized countries just as Hawala is banned by most of the countries around the world. During audits of various exchange houses in the UAE, it is known that drug dealers used Hawala and Hawala deals to Iraq during Saddam Hussains regime were violating U.S./U.N. Sanctions. The U.S. Authorities based on their findings that it has been extensively used by terrorist organizations, have announced that they would go after the hawalwallas in the Middle East. After terminating the employment of the auditor Sultan sent a circular to all banks in the UAE saying His accusations are baseless and fabrications while HSBC Management declared that everything was fine and normal at HSBC Middle East and He was simply taking a revenge on HSBC. In his various interviews, Sultan has often declared that there is no money laundering in the UAE. It is a product of western countries where organized crimes thrive. Bond, on the other hand, in his reports, talks about honesty and integrity being the pillars of HSBC. U can decide who is a better liar Sultan Suwedi or john Bond. 9.0 HSBC HISTORY WALL

Page | 62

Located on the ground floor of its head quarters in London is HSBCs history wall, which comprises of nearly 4000 pictures depicting important events in the Groups history around the world. Here one can explore HSBCs history of 140 years or so in pictures. The group traces its roots to the beginning of 1865 in China. Investors quickly took up its first IPO of HK $5 million. In short span, HSBC was acting as a banker to the Hong Kong government and also as sole banker to the British Government accounts in China, Japan, Penang and Singapore. In 1997, when Hong Kong was to become a part of Chine, they made a clever move to establish a holding company in the UK and acquire Midland bank. This strategic move ensured that the bank got a tag as UK based entity. The bank started to become a bigger player by acquiring banks around the world, but some of its acquisitions, like Republic national Bank (RNB) in the U.S., raised eyebrows. Edmond Safra, the charismatic owner of Republic, who was expected to play a major role post acquisition, was mysteriously murdered in Monte Carlo, where according to reports, he was to meet Sir john Bond. Safra had collaborated with the FBI to expose the Russian Mafias international money laundering operations in the U.S. Safra, one of the richest but most controversial bankers of his time, was obsessed with security. He had a battery of bodyguards with machine guns surrounding him, but on that fateful night, not even one of the bodyguards was on duty. One of his male nurses was made the scapegoat and his murder remains a mystery. Celebrities attended his burial ceremony and Sir Bond gave the main eulogy. Safra had described Sir Bond as a great banker to whom he had entrusted his bank. Today, HSBC is the biggest bank in Europe and ranks among the top five in the world. Nevertheless financial experts have been critical of HSBCs operations. Executive Intelligence Review (EIR), in one of its articles published in the February 1, 2002 issue, describes HSBC as the flagship bank of the global drug trafficking enterprise, properly known as the Dope, Inc. per EIR, the bank served as the backbone of the financial network of the British East India Company and financed Londons opium wars against China in the 19th Century. Since that time, it has served as a kind of discount facility for laundering dirty money from the drug, gold and diamond trade. The brave editor of EIR continues to live a life of threats. Another daring reporter, Vernon Silver from Bloomberg News (in an article dated May 31, 2005) has heavily criticized HSBCs policy of collecting deposits and profits in the U.S. and lending tons of money in countries like Iran, Syria and Sudan, which the U.S. Administration

Page | 63

says sponsors terrorism. Its lending operations to Iranian state-owned entities has come under fire and noting the current Iran and U.S. showdown, many lawmakers in the U.S. are unanimous in their agreement that entities tha do business with countries that sponsor terrorism should be boycotted and shown the door. It amounts to trading with the enemy and feeds oxygen to the terrorism pipeline. Yet another honest reporter, Glen Simpson from the Wall Street Journal reported an audit finding on the front page of its European Edition of September 17, 2003, about the controversial bank account of a mysterious salesman at HSBC Dubai having an annual turnover of $343 million and the notorious arms dealer, Victor Bouts web of accounts at HSBC Sharjah. Simpson was to write a series of articles on HSBCs UAE operations, but it seems the series was remote controlled to keep it quiet. The author, who was the former Chief Examiner of the UAE Central Bank had picked up that HSBC was running a devils workshop in the UAE. Post 9/11 Sultan Suwedi, who had midway stopped an audit, reported to media that Marwan Al Shhehai, who as per U.S. authorities was part of the pilot of United Airlines flight 175, the second plane to hit WTC 2 South Tower on September 11, was banking with HSBC in the Emirates. Sir Bond, who is a highly rated banker in the modern banking world, has a history and character like the Pied Piper. Bond is merely a high school pass out who tried to get into a University, but was turned down. He went to a school in America on an exchange program and got a job cleaning decks on a ship (according to a CNN interview dated June 06, 200). Well, the cleaning boy, now in his mid sixties, has graduated and mastered the art of cleaning the worlds dirty money, and is seen giving lectures to students around the world on fancy topics like Putting Theory into Practice and Social Responsibilities & Ethics. He should have resigned when I had picked up that their bank was involved in moving millions in unexplained and unknown funds for questionable undisclosed customers. The Chairman of a small bank in India called Charminar Bank shot himself in his office when his bank was involved in a scandal. The Bank, which was operating in the historical city of Hyderabad (where the heart of HSBCs back office operation is based), was recently visited by Bond and his team, but unfortunately, the tradition of the captain taking the blame was not learned. At HSBC, Bond is regarded as a ruthless cost cutter, a quality he shares with Sultan Suweidi. About his personal private life, Bond had once remarked, I am married with three children

Page | 64

and am dog-thoroughly-boring, and in one of his interviews, has attributed his success to sheer good luck. Well my dear, your luck has finally deserted you at the end of your career. I sincerely hope you remain married and your children stand behind you in support, or hide themselves from the world by standing behind you. 10.0 BANKER TO TERRORIST ORGANIZATIONS

Post 9/11, the U.S. authorities issued list of terrorist organizations, and banks all over the world were asked to identify and freeze bank accounts connected with terrorists. HSBC UAE Branches have admitted that they do maintain bank accounts for such terrorist oraganizations. It is rather surprising that despite our criticism, the Know Your Customer (KYC) policy is still not being strictly implemented. HSBC staff is more concerned at opening new bank accounts to take advantage of the incentive policy associated with booking new clients at the Bank. Sultan who was increasingly turning a blind eye on HSBCs Middle East operations did not allow us to review these accounts, which would have given us some trail on the remitters and end beneficiaries. Based on the scarce information provided by them, the inward transfers originated from Al Baraka Exchange in Oslo and Brakat Exchange in Vancouver, and carried messages like Help for Somalia, Aid for Somalia, and Support for Somalians. HSBC reported these accounts only when the U.S. authorities were on the lookout for terrorist related accounts and did not volunteer to inform the Central Bank despite being aware of the above disturbing messages accompanying the inward remittances. Following the 9/11 attack on America, President Bush had issued an Executive Order freezing the assets of individuals and organizations that support terrorism. Al Baraka Group, owned by Somalis and having major operations in Dubai, was accused of transferring profits and interest to Al Qaeda. The U.S. Authorities seized funds belonging to the group under the new Patriot Act. U.S. investigators believe that Barakat, a financial and telecommunications Conglomerate operating in many countries around the globe, has pumped millions and millions of dollars to Osama bin Ladens Al Qaeda organization. Paul ONeil, the U.S. Treasury secretary, nicknamed the group as a Hawala Conglomerate. U.S. authorities had raised Al Baraka Exchange and forced the Central Bank to close this entity immediately. UAE Central Bank must be pressured to allow international investigators unhindered access to

Page | 65

conduct a post mortem of such accounts, so as to pierce the veil of persons hiding behind these accounts and prosecute them. In one of his press interviews, John Bond admitted that, We are human organization and make mistakes. Even at my age, I make mistakes every single day. Well, my dear Bond, your mistakes can result in another 9/11 or 7/7 terrorist attack. Remember, only 007 James Bond has a license to kill, and that only in the movies. Incidentally, in 1911, a movie directed by Charles J. Brabin was made titled The Awakening of John Bond. I am afraid our Sir Bond will never be awakened.

11.0

LINK TO ARMS TRADE

In December 2008 the British anti-poverty charity War on Want released a report documenting the extent to which HSBC and other UK commercial banks invest in, provide banking services for and make loans to arms companies. The charity writes in its report that HSBC holds shares in the global arms industry totaling 450.6 million, and serves as principal banker for Meggitt, the UK's largest arms company. The report also details HSBC's dealings with known producers of cluster munitions and depleted uranium. Its reported that HSBC earned a total of 657.3m in profits for bank services provided to Textron, a US industrial firm that makes cluster bombs. In fact, the figure was in dollars and was not a profit: HSBC underwrote $657.3m in Textron share and bond offerings. The bank is not disclosing the profits made from these services or from the lending of $150m to Textron. The deadly trade in cluster bombs is funded by the world's biggest banks who have loaned or arranged finance worth $20bn (12.5bn) to firms producing the controversial weapons, despite growing international efforts to ban them. HSBC, led by ordained Anglican priest Stephen Green, has profited more than any other institution from companies that manufacture cluster bombs. The British bank, based at Canary Wharf, has earned a total of 657.3m in fees arranging bonds and share offerings for Textron, which makes cluster munitions described by the US company as "leaving a clean battlefield".

Page | 66

Campaigners maintain the deadly weapons can explode years after combat, killing or maiming innocent people. HSBC will face protests outside its London headquarters today. Goldman Sachs, Bank of America, JP Morgan and UK-based Barclays Bank are also named among the worst banks in a detailed 126-page report by Dutch and Belgian campaign groups IKV Pax Christi and Netwerk Vlaanderen. Goldman Sachs, the US bank which made 3.19bn proft in just three months, earned $588.82m for bank services and lent $250m to Alliant Techsystems and Textron. Of the banks named, only Barclays was prepared to comment. It said: "Barclays group provides financial services to the defence sector within a specific policy framework. It is our policy not to finance trade in nuclear, chemical, biological or other weapons of mass destruction. "Our policy also explicitly prohibits financing trade in landmines, cluster bombs or any equipment designed to be used as an instrument of torture." A spokeswoman added that Barclays had supplied money to Textron, which makes cluster bombs, but that the US firm was a broad-based weapons manufacturer. Last December 90 countries, including the UK, committed themselves to banning cluster bombs by next year. But the US was not one of them. So far 23 countries have ratified the convention. The UK has yet to do so, but the Foreign Office confirmed that it would form part of the government's legislative programme before the next election. A Foreign Office spokesman said the tightest export control order had been placed on cluster bombs, which extended to banks supplying money to manufacturers. The government was aware the control order was not working and "is working on it". Esther Vandenbroucke, of Netwerk Vlaanderen and one of the report's authors, said: "The responsibility to ban cluster munitions is a shared responsibility. It requires courage, and it requires an effort. We are just months away from an international treaty entering into force and it is time for signatory states to the Convention on Cluster Munitions for non-signatory states and for financial institutions to act now." Last December, the New Zealand government's pension fund sold shares in Lockheed Martin because of its link to the manufacture of cluster bombs. Similar actions have been taken by the Irish and Dutch governments.

Page | 67

Millions of people will be endangered by up to tens of millions of cluster bomblets that have not yet exploded, causing lasting economic and social harm to communities in more than 20 countries for decades to come, campaigners have warned. The vast majority of cluster bomb casualties occur while victims are carrying on their daily lives. On Monday, a Lebanese 20-year-old man had his leg amputated after a cluster bomb exploded in southern Lebanon Houla village. A security source said he was collecting wood in his border village when the explosion occurred. The Israeli army made extensisve use of cluster bombs during the war in south Lebanon three years ago. Cluster bombs were most recently used by both the Georgians and the Russians in the dispute over South Ossetia. They were also used in the Iraq and Afghanistan invasions. British banking giant HSBC agreed to pay a record $1.92 billion settlement Tuesday after a broad investigation by U.S. federal and state authorities found the bank violated federal laws by laundering money from Mexican drug trafficking and processing banned transactions on behalf of Iran, Libya, Sudan and Burma . The settlement, a combination of forfeitures and civil penalties, shows the Londonheadquartered financial powerhouse for years deliberately channeled hundreds of millions of dollars of the prohibited transactions through its U.S. arm. "HSBC is being held accountable for stunning failures of oversight and worse that led the bank to permit narcotics traffickers and others to launder millions of dollars through HSBC subsidiaries, and to facilitate hundreds of millions more in transactions with sanctioned countries," said U.S. Assistant Attorney General Lanny Breuer in announcing the largest settlement of its kind. "The record of dysfunction that prevailed at HSBC for many years was astonishing," said Breuer. The settlement, part of a deferred prosecution agreement filed in Brooklyn federal court, means HSBC avoids a criminal conviction on money laundering and other major charges which could have amounted to a financial death sentence by blocking the bank's access to the U.S. banking system. The settlement is the latest and largest of several deals U.S. authorities have reached with other banks over similar allegations. Federal and state prosecutors retain legal power to

Page | 68

prosecute HSBC if the bank fails to comply with banking and oversight reforms included in the agreement, including the appointment of an independent monitor. "We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again," HSBC Group Chief Executive Stuart Gulliver said in a statement earlier Tuesday. Adding that the bank had cooperated with U.S. investigators, Gulliver said "we have been taking concrete steps to put right what went wrong." He said the deferred prosecution agreement notes that in recent years the bank has increased spending and staffing on money-laundering prevention and beefed up know-yourcustomer efforts. HSBC spent more than $290 million to improve its money-laundering prevention policies, terminated 109 banking correspondent relationships considered potential money laundering risks and required a number of senior bank officers to return previously paid bonuses, Gulliver said. The agreement covers an investigation that involved the Department of Justice, the Manhattan District Attorney in New York, the Federal Reserve, the Treasury Department's Office of Foreign Assets Control and its financial crimes enforcement unit, and the Comptroller of the Currency. HSBC shares were up 0.5% to $51.82 in afternoon trading Tuesday. The shares also traded higher in London. "Obviously, $1.9 billion is a very large number, but it's very manageable" without affecting HSBC's bottom line, said Ian Gordon, head of bank research for Investec Securities in London. "It's clearly within market expectations." Some legal analysts questioned U.S. authorities' failure to force HSBC to plead guilty to criminal charges. Although federal officials said the settlement was based on the bank's cooperation and renewed efforts to fight money laundering, the analysts said a criminal plea would have sent a powerful deterrence message to the banking industry. "It's fine that HSBC's CEO talked about accepting responsibility, but when will he be held accountable for this tremendous breach of trust?" asked Mark Rifkin, a New York

Page | 69

shareholder rights attorney and partner at the Wolf Haldenstein Adler Freeman & Herz law firm. The federal court filings outlined the prohibited transgressions in dramatic detail. Between 2006 and 2010, the Mexico's Sinaloa Cartel, Colombia's Norte del Valle Cartel and other alleged drug traffickers laundered at least $881 million in illegal proceeds through accounts in HSBC's U.S. arm, the filings show. "These traffickers didn't have to try very hard," said Breuer. "They would sometimes deposit hundreds of thousands of dollars in cash, in a single day, into a single account, using boxes designed to fit the precise dimensions of the teller windows in HSBC Mexico's branches." Similarly, HSBC bankers as far back as 2001 cleared U.S. dollar transactions through the bank's U.S. arm while hiding the fact that the money was linked to Iran's Bank Melli. A June 2001 email from an HSBC relationship manager in Europe wrote that Bank Melli had been instructed not to input an "Iranian referenced customer name" with the transaction, thus avoiding any sign of a U.S. legal breach. The details echoed findings of a July report by the Senate Permanent Subcommittee on Investigations. The panel found evidence that two HSBC affiliates routed nearly 25,000 Iranlinked transactions involving $19.4 billion through the bank's U.S. arm over a seven-year period. Those transactions violated U.S. and British law. The panel's report criticized U.S. regulators for failing to take action despite knowledge that HSBC's money-laundering safeguards were inadequate. But the subcommittee's chairman, Sen. Carl Levin, D-Mich., hailed Tuesday's settlement, saying it "sends a powerful wakeup call to multinational banks about the consequences of disregarding their anti-money laundering obligations." Under the deferred prosecution agreement, HSBC won't be prosecuted if it meets certain conditions, including stronger internal controls to prevent money laundering. Such agreements have been used often by the Department of Justice to settle allegations of foreign bribery charges against large corporations. Money laundering by banks has become a priority target for U.S. law enforcement. In another case Monday, British bank Standard Chartered, accused of scheming with the

Page | 70

Iranian government to launder billions of dollars, signed an agreement with New York regulators to pay $340 million to settle money laundering charges. Since 2009, foreign banks with U.S. arms, including Credit Suisse, Barclays and Lloyds, have made payments to settle allegations they moved money for people or companies that were on a U.S. sanctions list. Because these banks had U.S. subsidiaries, they are subject to U.S. laws and regulations. In his statement Tuesday, HSBC's Gulliver said: "The HSBC of today is a fundamentally different organization from the one that made those mistakes. Over the last two years, under new senior leadership, we have been taking concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these matters." HSBC announced Monday that Robert Werner, a former head of the Treasury Department agencies responsible for sanctions against terrorist financing and money laundering, will begin a new role at HSBC as head of financial crime compliance and become the bank's money-laundering reporting officer. Werner has been head of global standards assurance since August. In January, HSBC hired Stuart Levey, a former Treasury undersecretary for terrorism and financial intelligence, as chief legal officer. And a former policy adviser in the Obama administration, Preeta Bansal, in October became HSBC's global general counsel for litigation and regulatory affair. 11.1 SUDDEN WITHDRAWAL WITH GRADUATES OVERDRAFTS

Graduate Bank Account Features and Benefits

Representative Example Account Type Monthly Charge Minimum Monthly Credit Limit

If you use an overdraft limit of 1,200 the interest rate charged will be 0% EAR (variable). graduate 0 0 0.00 0 The interest free overdraft available with this account is:Year 1 -1500 Year 2 -1000

Interest Free Overdraft varies

Page | 71

Standard Overdraft Rate Daily Overdraft Charge Headline Interest Rate Reward Payment Minimum Investment Internet Banking Branch Banking Telephone Banking

0% 0 0% 0 0 yes yes yes

There is no authorised overdraft rate. 0 0. This facility is not available. 0

Account Details Account Type Card Type Application Criteria Permanent Resident Minimum Monthly 0 Credit Minimum Age Maximum Age Minimum Income Minimum Investment Maximum Investment Student Account Graduate Account Area Restrictions Facilities No There are no area restrictions. Bank yes This is a graduate bank account. Bank No This is not a student bank account. Unlimited Ul 18 years Unlimited 0 0 18 Ul There is no minimum income required for this account. 0 UK yes This product is only available to individuals who are permanent UK residents. 0 graduate Visa

Page | 72

Internet Banking Branch Banking Telephone Banking Mobile Banking Text Banking Post Banking Package Account Switching Service Debit Card ATM Card Prepaid Card Maximum Withdrawal Passbook Cheque Book Standing Orders Direct Debits Bill Service ATM Statements Text Statements Minimum Additional Deposit

yes yes yes yes yes

Office yes Current no yes yes yes no ATM 300 no optional yes yes A prepaid card is not available with this account. 300.00

Payment yes Mini yes Mini yes 0 0 The qualifying period is 2 years.

Maximum Account 2 years Term Rates Headline Interest 0% Rate

0.

Page | 73

Reward Payment Introductory Bonus Overdraft Overdraft Facility Interest Overdraft Limit

0 0%

This facility is not available. There is no introductory bonus payable.

yes The interest free overdraft available with this account is: Year 1 - 1500 Year 2 - 1000

Free varies

Maximum Interest 1,500 Free Overdraft Overdraft Limit Standard Overdraft Rate Monthly Overdraft 0 Charge Daily Charge Automatic Overdraft Facility Overdraft Arrangement Fee Unauthorised Overdraft Rate Daily Unauthorised Overdraft Charge Monthly Unauthorised Overdraft Charge Overdraft Charge Letter 0.00 0 0 19.9% no 0 Overdraft 0 0% Buffer 10

The maximum interest overdraft available is 1500. The overdraft buffer limit is 10. There is no authorised overdraft rate. 0 0 0

The annual unauthorised overdraft rate is 19.9%. There is no daily unauthorised overdraft charge. 0

Page | 74

Fee & Charges Monthly Charge Free Banking Transaction Charge Europe Transaction Charge Worldwide Debit Card Charge 0% Europe Debit Card Charge 0% Worldwide ATM Withdrawal 2 There is no charge for debit card transactions outside the UK apart from the exchange rate adjustment which is 2.75%. There is no charge for debit card transactions outside the UK apart from the exchange rate adjustment which is 2.75%. A charge of 2.00% (min 1.75 max 5.00) is made for ATM are withdrawals free from abroad. cash Withdrawals machines. ATM Withdrawal 2 A charge of 2.00% (min 1.75 max 5.00) is made for ATM are withdrawals free from abroad. cash Withdrawals machines Unauthorised Transaction Fee 25 per excess (max If the customer has not agreed an overdraft 1 per day) and the account goes overdrawn by more than 10 or they exceed an agreed overdraft limit by more than. ATM Unpaid Withdrawal 0 Direct 25 0 The charge made for an unpaid item is as follows: unpaid item of up to 10no charge. up to 2510 per item Above 2525.00. Stopped Charge Charge for Copy 0 of Cheque 0 Cheque 12 12 Charge UK Debit Charge HSBC Charge Worldwide HSBC Charge Europe 2.75% 2.75 0 yes 2.75% 2.75 0.00

Page | 75

Unpaid Charge Standing Charge Unpaid

Cheque 25

The charge made for an unpaid item is as follows: unpaid item of up to 10no charge. up to 2510 per item Above 2525.00

Order 0 Standing 25

0 The charge made for an unpaid item is as follows: unpaid item of up to 10no charge. up to 2510 per item Above 2525.00...expand

Order Charge Bankers Charge Duplicate Statement Charge Special Clearance 15 Charge Bankers Reference 8.50 Charge CHAPS Charge Text Charge Other Charges Incentives Incentives Available forex,green option,pref account,pref unsecured loan Text Updates Faster Service Student & Graduate Incentives CHAPS Facility BACS Facility Interest Overdraft Year 1 yes yes Free 1,500 Payments yes Message no no 30 Messaging 0.0 1 Draft 20

20 1 15 The charge applied for a bankers reference is 8.5. 30

Preferential

Regular

Saver

available

to

savings Graduate Bank Account holders. Preferential interest rates available on loans up to 25,000. Commission

1500

Page | 76

Interest Interest Interest Interest Identity Assistance Withdraw

Free 1,000 Free 0 Free 0 Free 0 Theft no no yes

1000 0 0 0

Overdraft Year 2 Overdraft Year 3 Overdraft Year 4 Overdraft Year 5

Uncleared Funds Loan A graduate loan package is available.

Application Criteria Permanent Resident Minimum Credit Minimum Age Maximum Age Minimum Income Minimum Investment Maximum Investment Student Account Graduate Account Area Restrictions no There are no area restrictions. Bank yes This is a graduate bank account. Bank no This is not a student bank account. Unlimited Ul 18 years 0 0 18 There is no minimum income required for this account. 0 Unlimited Ul Monthly 0 UK yes This product is only available to individuals who are permanent UK residents. 0

Page | 77

Student Bank Account of Different Banks Account details Provider Barclays Interest-free overdraft Up to 2,000 a year from Yr 1-Yr 5 Authorised overdraft 10% student discount on possessions Incentives

insurance and student travel insurance Clydesdale/Yorkshire None Yr 1, 7.49% None (up to 1,000); Yr 2+, 7.49% (up to 3,000) Halifax HSBC Up to 3,000 a year from Yr 1-Yr 5 Up to 3,000 a year None from Yr 1-Yr 5. 500 formal limit agreed at account opening Lloyds TSB/Bank of Yr 1, 1,500 (0-6mths 8.21% Scotland 500, 7-9mths 1,000, 5pm 10mths+ 1,500); Yrs 2 fee and 3, 1,500; Yrs 4, 5 buffer and 6, 2,000 NatWest exceeded if plus Free NUS Extra card for usage three years at offering selected 10 discounts 20% discount on card care protection Discounts on Lonely Planet travel guides

stores, and 75 discount off a holiday booked with STA Travel Free four-year Student 16-25 for

Yr 1, up to 1,000 (0- Nil 4mths 500, 5-8mths 750, 9mths+ 1,000); Yr 2, up to 1,250; Yr 3, up to 1,500; Yr 4, up to 1,750; Yr 5, up to 2,000

Railcard

existing current account customers who switch to a student account

Royal Scotland

Bank

of Yr 1, up to 1,000; Yr Nil 2, up to 1,250; Yr 3,

Student discount card on shopping, discounts

Page | 78

up to 1,500; Yr 4, up to 1,750; Yr 5, up to 2,000 Santander Yr 1, 1,000; Yr 2, Nil 1,250; Yr 3, 1,500; Yr 4, 1,800; Yr 5, 2,000 Smile Yr 1, 1,000; Yr 2, Nil 1,400; Yr 3, 1,800; Yr 4+, 2,000 Co-operative Yr 1, 1,400; Yr 2, 1,700; Yr 3, 2,000 Which is the best account to go

on laptops and essential contents insurance 50 cashback for

customers who open or switch to this account between 1 July and 31 August None

None

for

students?

The key feature of a student bank account far outweighing any gimmicky freebies will be the size of interest-free overdraft on offer. This year, the most generous are from Halifax and HSBC, both of which are offering up to 3,000 interest-free and fee-free borrowing from year one compared with 1,000 at NatWest and Santander and 1,500 at Lloyds TSB, for example. Barclays is offering 2,000 interest free from year one. For those who feel such a high first-year limit might be too tempting for youngsters who have yet to learn to budget, other banks offer the alternative of a tiered system, with the level of interest-free borrowing increasing in later years. NatWest, for example, has an interest-free limit of 1,000 in year one, with up to 500 in the first four months, rising to 750 in months five to eight, then up to 1,000 for the last three months. In year two, this rises to 1,250, to 1,500 in year three, 1,750 in year four and 2,000 in year five. In comparison, Clydesdale and Yorkshire banks do not offer any interest-free overdraft facilities to students. Will customers (students) automatically get a free overdraft?

No. Most limits are quoted as "up to", so don't assume you will get the maximum. "The level

Page | 79

of overdraft offered will be credit scored and if you don't fully match up to their criteria, you may be offered a lower limit," says Sylvia Waycot, spokeswoman for Moneyfacts.co.uk. Halifax, for example, while offering up to 3,000, guarantees a fee-free overdraft of only 500, though this rises to 1,000 from 16 August. Halifax data shows the average overdraft by the end of October has been around 700, in excess of the current 500 level, which means students have typically been applying for an extension early in their first term or have been incurring fees hence the decision to increase the minimum interest-free overdraft to 1,000. What if students exceed theirs overdraft limit?

Of those banks that will grant students a further overdraft above the interest-free limit, Halifax is probably the best value, charging 7.2% (0.58% a month). But, a spokesman points out: "It is very rare that we would allow a student a planned overdraft limit in excess of 3,000. However, exceptional circumstances might warrant it. The absolute maximum is 5,000." In contrast, you will pay 8.21% plus a fee of 5 per month if a 10 buffer is exceeded at both Lloyds TSB and Bank of Scotland and 8.9% at Barclays. Other banks, including NatWest, Santander, Smile and the Royal Bank of Scotland, do not allow students any additional authorised borrowing. So if you go beyond your authorised interest-free limit, you will end up paying hefty unauthorised overdraft charges. Santander, for instance, charges a flat fee of 5 a day, capped at 10 days a month, for being overdrawn without asking so that could mean 50 for each month you fail to get your borrowings back below your interest-free limit. HSBC simply do not allow students any further borrowing, either authorised or unauthorised. "If you are down to the last 5 of your interest-free overdraft, we will allow you to spend, say, 10 without charge, but will contact you to let you know you are at the end of your limit and not allow any further payments to be made from the account," a spokesman said.

Page | 80

When

will

bank

make

students

pay

off

the

overdraft?

Students should make sure they know what will be expected of them when it comes to paying off their interest-free overdraft after graduation. At HSBC, for example, 1,500 is interest-free during the first year after graduation and 1,000 interest-free in the second year, with any balances above those interest-free entitlements charged at 19.9% EAR. After two years, graduate accounts are converted to standard current accounts. Will students earn interest on the money in their account?

Those rare students who manage not to need an overdraft facility perhaps they have savings, sponsorship, a lucrative part-time job or generous parents might want to consider the "in credit" interest rate paid and/or the free incentives on some student accounts. But there is not a lot of value on offer. Of the banks offering credit interest, the best is 1.98% for the first year on balances of up to 1,000 from HSBC, followed by 1% on balances up to 500 from Santander. What's the best freebie for opening an account?

Santander is offering a 50 cashback to customers who open or switch to its Student Current Account before 31 August. But historically, the most popular perk on student accounts was arguably the free four-year 16-25 Railcard from NatWest, but this is now only on offer to existing current account customers who upgrade to its Student account. Elsewhere, perks mainly comprise student store discount cards and discounts on insurance products. Can students get a credit card as well?

Students should avoid credit cards; interest rates are very high and debt can build quickly. "While borrowing on a credit card may seem tempting, students should treat this with caution," says Waycot. "Although credit limits offered to students are small, if you have no regular income to repay the debt then even a few hundred pounds can soon escalate as interest charges mount." The best way to avoid troubles is to draw up a budget. You'll find handy online budget calculators at, for example, ucas.com, studentcalculator.org.uk and on university websites.

Page | 81

"Many students will receive their grants as a lump sum at the start of each semester. It is worth setting yourself a weekly budget to ensure you continue to have money to live on throughout the term," Waycot says. "And if you do get into trouble with your finances, don't bury your head in the sand. If you tackle any issue head on, the bank will be more lenient and willing to help. "Many branches at, or near, universities also offer specialist advice, which can be invaluable in helping you to manage your money." Should students get insurance? If students are going to be living in halls, the first thing to do is check whether their contents are already covered. If not, the most tempting thing to do is to put expensive items on your parents' home insurance policy. Listing them as contents outside from the home (making it clear you'll be living away from the residence during term time) is undoubtedly the cheapest way to cover laptops and mobiles, typically 30 a year. However, parents need to consider whether they are ready to lose any no-claims discount they have built up and accept higher premiums if they make a claim. Endsleigh, and the like, will sell you specialist student insurance. These can be pricey. Endsleigh typically charges 131 a year for basic cover or 180 with cover outside the home. A better bet could be JSInsurance which starts cover at 52 a year. Note that student policies in general have some fairly onerous clauses, and it's worth reading the key facts document before you hand over your card details. If their computer and mobile are their only valuable items, consider a gadget-only policy (such as gadgetinsurance.com) which will cover a mobile and four other gadgets such as laptop, camera etc for 79 a year. Such policies often also cover accidental damage. But few will pay out unless there is a sign that the home has been damaged to gain entry, so if your flatmate leaves the back door open and your stuff is nicked, don't expect a payout. And unless they are the next Bradley Wiggins, buy a cheap bike to get around. Paint the frame with flower motifs or generally distress the machine cosmetically. Paint on their

Page | 82

name and mobile number to make the bike hard to sell for thieves. Then buy a decent 40 Abus lock, and don't worry about insuring it. Miles Brignall.

11.2 Graduate Overdraft Account The student overdraft lasts for the 3 years when they are at university, each year they can review your overdraft to see if you need it to be extended any. The maximum interest free entitlement Year Year Year increases 1 2 3 with each year up up up of study to to to as follows:1000 1,250 1,500

The date of student accounts expiry date would probably be their review on whether they need to extend their overdraft or not. After students graduate, they can switch to a Graduate account which lets you have interest free on your overdraft for a couple more years (only up to a certain amount) HSBC is scrapping interest free overdrafts for new graduates. Thousands of graduates will be hit by fresh bank charges after a leading lender scrapped free overdrafts for students fresh out of university. Traditionally, banks have given new graduates time to clear their debts by offering a gradual reduction in the free facility in three years after they stop studying. But HSBC has said all new graduates banking with them will have to pay nearly 10 per cent interest on their overdraft from this August. If they want the previously free gradually reduced three-year overdraft, graduates will have to pay 9.95 a month for a Graduate Plus account. Although competitors said they would continue to offer free overdrafts for graduates this year, they offered no guarantees this wouldn't change in the future. HSBC said it was a way of helping students realise that borrowing costs money.

Page | 83

Spokesman Karen Garner said: "The new service is put together to create a more level playing field, we wanted them to distinguish between being a student and graduate, because as the latter you are in a position to earn money. "It softens the blow of realising the costs associated with borrowing, and graduates will be more inclined to take action if they realise they are paying for something. "We obviously appreciate there is a risk of that some students won't bank with us anymore." All new graduates banking with HSBC will have to pay nearly 10 per cent interest on their overdraft from this August The bank currently offers a free overdraft of 1,500 to students in their third year, but this will be slashed when they are transferred to a graduate account on July 16. Overdraft charges of 9.9 per cent will start a month later - and a student with the maximum overdraft will pay almost 12 a month. Former students who graduated before this summer will not be affected. The National Union of Students has warned that HSBC's action would put pressure on parents to pay off their children's overdrafts to avoid the new fees. And the NUS said a "significant proportion" of the 280,000 students who graduate this year will be affected and may turn to their parents to help them financially rather than pay the new charges. Vice president Wes Streeting said: "As a result of this decision, we may see more graduates boomeranging home and asking mum and dad to help them to reduce their overdrafts. "The loss of interest free overdrafts for graduates is of concern to us as those who have recently finished university often do not command great initial earnings. "It tends to take them a couple of months at least, sometimes years, to get on their feet financially. In many cases they will do the same kind of low-paid work as they did as students for a significant period of time after graduating.

Page | 84

"It is surprising that HSBC have taken this decision and we would urge them to consider more responsible packages, rather than seeking to extract greater profits from hard-up graduates." Since the Office of Fair Trading capped credit card penalty charges in April last year banks have been looking for ways to recoup money. Millions of bank customers have reclaimed overdraft penalty charges - hitting banks hard and making them consider introducing monthly bank charges as standard. Andrew Hagger, of the price comparison site Moneyfacts, said: "Students are going to have an awful lot of debt so one of the major perks is to get as much interest free borrowing as possible to lighten the load. "I can't see many students taking on this account and remaining loyal to HSBC. They need to remember they can go to other banks." There is concern that other banks will follow HSBC and cut their interest-free overdrafts. Although most high street banks have already launched graduate accounts with interest-free overdrafts this year, they have not ruled out cutting these in the future. The regular graduate accounts at Lloyds TSB, NatWest and The Royal Bank of Scotland offer interest-free overdrafts starting at 2,000 on graduation, which gradually reduce over three years. Barclays offers a similar account with an interest-free overdraft starting at 1,500 which reduces over two years, as well as an account costing 5 a month which has perks including 3,000 interest free overdraft. The student bank market is incredibly competitive. Banks are keen to sign-up customers while they are young and build up a sense of loyalty so they stay with them for life, especially students who are likely to command good salaries once they graduate. There has been no suggestion so far of cutting the large overdrafts enjoyed by students or any of the perks used by banks to attract them such as free four-year railcards.

Page | 85

Earlier this month it emerged students borrow three times as much as they did a decade ago with a total debt of 18bn, according to the Student Loans Company. They borrowed more than 3bn last year alone. The National Union of Students believes "typical" graduate debt is around 30,000 to cover costs including 3,000-a-year fees. The 9.9 per cent interest charged on overdrafts in HSBC's graduate account is around half of that on their standard current account of 18.6 per cent. Britain's biggest bank has scrapped a decision to charge graduates for their overdrafts after an internet revolt. HSBC backtracked after the social networking website Facebook was besieged with complaints from debt-stricken university leavers. A forum set up on the website, "Stop the great HSBC graduate rip-off", had attracted 5,000 members before the bank's climbdown. Many graduates were livid because they claimed they were sold their student accounts on the basis they would get an interest-free overdraft for at least two years. In July, HSBC wrote to those graduating this year explaining their student accounts would be transferred to graduate accounts without an interest-free overdraft. It said they would see charges appearing in August on their debt at 9.9 per cent interest per year. Anyone with an average 1,500 overdraft would have had to pay 148.50 a year in interest. A demonstration outside HSBC's Canary Wharf headquarters in East London was planned by the National Union of Students for next Tuesday. NUS vice-president Ama Uzowuru said: "We are pleased HSBC has recognised this would hit graduates when they are at their most vulnerable." HSBC will now refund any interest levied on overdrafts for 2007 graduates.

Page | 86

It will not charge interest on overdrafts up to 1,500 held by this year's university leavers while it devises a new graduate account. Andy Ripley, from HSBC, said: "We have taken this decision following feedback from our graduate account holders. "We will work with the NUS on the new account." 11.3 Sudden withdrawal of graduate overdrafts Issues In July 2007, HSBC suddenly withdrew its interest-free overdrafts for graduates. Students graduating that year discovered that they were to face unexpected bills of up to 140 a year. Students mobilised protests using the social networking website Facebook and in August HSBC reversed their policy, freezing overdraft charges to recent graduates and pledging to repay charges deducted in August while holding talks with the National Union of Students. HSBC is facing an internet revolt from increasingly angry graduates who have had their interest-free overdrafts scrapped. Thousands are threatening to leave the bank, and the National Union of Students is planning a protest outside HSBCs Canary Wharf headquarters in London next Tuesday. This years graduates, already saddled with average debts of over 12,000, are now charged 9.9% a year interest if they are overdrawn, unless they agree to pay a 9.95 a month fee instead. Someone with an average overdraft of 1,500 would be charged 148.50 a year interest. Graduates are furious because they say they were told HSBC would provide an interest-free overdraft to help manage their debts after university when they took out their student accounts. However, the bank announced in July it would axe the interest-free overdraft incentive. A group set up on social networking internet site Facebook, called Stop the great HSBC graduate ripoff, already has over 3,300 members and the number is rising by the hour. One post written yesterday by a graduate from Exeter says: Just ditch HSBC and join another bank, then theyll lose a load of customers! I just moved to Natwest.

Page | 87

Another livid HSBC university leaver from London adds: Typical HSBC. I hope all students stop using the bank, then it will give a signal to the restnotto follow HSBC in introducing charges. A Leeds-based graduate says: I think its absolutely ridiculous. I cant wait to see what HSBC says when everyone waves goodbye and they lose out. The NUS is suggesting graduates switch to another bank if they expect regularly to go overdrawn. RBS/NatWest, Barclays, Abbey and Lloyds TSB all offer interest-free graduate overdrafts. Wes Streeting, from the NUS, says: It is outrageous that HSBC has imposed such changes after very little notice and consultation with its customers. We are encouraging current and new students to look carefully at their banking options. The only way to get HSBC to change its mind is to hit it where it hurts in its wallet. HSBC wrote to those affected in late June and early July giving 30 days notice of the changes, so some would have started to rack-up charges from July 28. It came after HSBC transferred all student accounts from 2007 graduates into graduate accounts. Graduates from previous years with interest-free overdrafts from HSBC will retain their facility. Those who graduated in 2006 received 1,500 interest-free until this summer and will get 1,000 for another year. RBS offers a 2,000 interest-free overdraft in the first year after graduating, 1,500 in year two and 1,000 in year three. It charges 9.4% on any further agreed borrowing. Lloyds TSB has the same offer but with a higher borrowing rate of 16.8%. Abbey offers 2,000 interest-free in year one, 1,000 in year two, and 500 in year three, with further borrowing at 9.9%. Natwest offers the same terms as Abbey, but with a 17.81% borrowing rate. Barclays offers 1,500 in year one, 1,000 in year two and further borrowing at 15.6%. Anyone switching in their second or third year after graduation will remain in that band on their new account. An HSBC spokesman says: At 9.9%, we offer one of the lowest borrowing rates on overdrafts. We will not charge a higher rate for exceeding the agreed overdraft.

Page | 88

A Financial Ombudsman Service spokeswoman says: If we receive a complaint, we would look closely at the terms and conditions and any promises made to consumers. The revolt against HSBC is the latest consumer uprising against financial institutions in which the internet has proved a powerful tool in spreading the word quickly. Others have included: Bank charges the outcry about high penalty fees and interest rates charged by banks when their customers go exceed their overdraft limit; Payment protection insurance the way insurance is sold as part of a loan or credit card is under investigation by the Competition Commission; Post Office closures customers, particularly in rural areas, have petitioned to keep post offices in their communities; Endowment mis-selling consumers have used internet sites to swop information and print standard letters of complaint.

Page | 89

REFERENCES Padmalatha S. (2011). Management of Banking and Financial Services. India: Pearson Education India. Page 455. Latter T.(2007). Hong Kongs Money: The Resumption of Chinese Sovereignty and the Basic Law. Hong Kong: HK University Press. Page 61. Book L. (2011). Hsbc:Hang Seng Bank, Hsbc, Rosanna Wong, Li-Ka-Shing, the Hongkong ans Shanghai Banking Operation, Hsbc Main Building, Hong Kong. Hong Kong: General Books. Page 35. http://www.dailymail.co.uk/news/article-478842/Facebook-campaign-stops-great-HSBCgraduate-rip-off.html#ixzz2i8yBcej3 http://www.dailymail.co.uk/news/article-463543/HSBC-scraps-free-overdrafts-newgraduates.html#ixzz2i8xQPv39 http://www.dailymail.co.uk/news/article-463543/HSBC-scraps-free-overdrafts-newgraduates.html#ixzz2i8xDiZtl

Financial Results - HSBC Bank Malaysia Berhad | HSBC Malaysia. (n.d.). Retrieved October 19, 2013, from http://www.hsbc.com.my/1/2/about-hsbc/corporate-information/financial
http://www.money.co.uk/current-accounts/current-account-details/HSBC/Graduate-BankAccount.htm#ixzz2iAV0Ejpr http://www.theguardian.com/business/2009/oct/29/banks-fund-cluster-bomb-trade http://en.wikipedia.org/wiki/HSBC http://en.wikipedia.org/wiki/The_Hongkong_and_Shanghai_Banking_Corporation http://www.usatoday.com/story/money/business/2012/12/11/hsbc-launderingprobe/1760351/ http://i.telegraph.co.uk/multimedia/archive/00795/hsbc-sumo-460_795399c.jpg http://www.theguardian.com/business/2008/aug/24/hsbcholdings.banking

Page | 90

Page | 91