More bad news for bank stocks
Stories about suspicious transactions may be overblown, but HSBC has plenty of other problems to worry about. Matthew Partridge reports


Claims that some of the world’s largest banks “moved large sums of allegedly illicit funds over nearly two decades”, despite “red flags” about the origins of the money, caused shares in the sector to fall on Monday, say David Pegg and Julia Kollewe in The Guardian. Barclays, HSBC and Standard Chartered were among those hit by the leak of thousands of documents showing $2trn (£1.55trn) of “potentially corrupt transactions” between 1997 and 2017 that passed through the US financial system.
For HSBC investors in particular, these headlines may feel unpleasantly familiar. Eight years ago, the bank was fined nearly $2bn, and forced to agree a deferred prosecution agreement by the US Department of Justice, for “providing banking services to drug cartels and other criminals”, says Katherine Griffiths in The Times. Its Swiss subsidiary was also hit by claims in 2007 that it had been helping clients to dodge taxes. The latest allegations could lead to a “flurry of legal claims” against it from the victims of the fraudsters whom it supposedly helped move money.
An overreaction
Calm down, says Liam Proud on Breakingviews. While it’s true that banks “could improve their systems for spotting money laundering”, the behaviour is “less scandalous than some of the headlines make it sound”. This is because the allegations are based on “suspicious activity reports” (SARs) that the banks must file with the authorities every time they think that criminal activity could be going on. Anti-money laundering systems “catch many legitimate transactions”: one estimate is that 90% of SARs turn out to be false positives. So it’s standard practice for banks to report – rather than block – them.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
This report looks like the least of HSBC investors’ worries, agree Margot Patrick and Frances Yoon in The Wall Street Journal. A bigger concern is that HSBC could be put on an “unreliable entities” list in China that “would threaten the bank’s growth plans in retail banking and in the country’s securities markets”. China’s Ministry of Commerce has said such entities could “face limits on investment and staff in China”. While no companies have been put on this list yet, China’s state-owned media have named HSBC as a possible candidate.
Any action by China against HSBC would be particularly damaging given that HSBC “has invested heavily in the mainland”, says Lex in the Financial Times. China also contributes $1.5bn worth of pre-tax profits, at a time when HSBC’s earnings in the rest of the world have fallen. Having alienated Europe and America, by publicly supporting Beijing’s new security legislation in Hong Kong, the loss of Chinese support would leave it “friendless”. It’s therefore no surprise that its shares “are trading at levels last seen in the 1990s”, a demonstration of why businesses that have become “political shuttlecocks” are “not worthwhile investments”.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
-
UK-US trade deal announced: US cuts tariffs on UK car imports to 10%
Keir Starmer and Donald Trump have announced a UK-US trade deal, but the US president has refused to lift baseline tariffs on most UK goods. What does it mean for the UK?
-
How to use mid-caps to diversify from the US
Medium sized companies are overlooked by investors but could offer an attractive ‘sweet spot’. We consider the case for mid-caps amid market volatility.
-
Will Comstock crash – or soar?
Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.
-
'As AGMs go digital, firms must offer a new form of scrutiny for shareholders'
Opinion Technology has rendered big AGM meet-ups obsolete, but the board still needs to be held to account, says Matthew Lynn
-
Unilever braces for inflation amid tariff uncertainty – what does it mean for investors?
Consumer-goods giant Unilever has made steady progress simplifying its operations. Will tariffs now cause turbulence?
-
Two ways to tap into monopoly profits from airports
Most investors can’t get their hands on airports. Here are two ways you can
-
Fat profits: should you invest in weight-loss drugs?
The latest weight-loss treatments could transform public health and the world economy. Should you invest?
-
How investors could profit from Ramsden Holdings' four-part growth strategy
Ramsdens Holdings offers a diversified set of financial and retail services and a juicy yield, says Dr Michael Tubbs
-
How to invest in the booming insurance market
The insurance sector is experiencing rapid growth after years of stagnation. Smart investors should buy in now, says Rupert Hargreaves
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocks
Opinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton