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Three years after passage of the Dodd-Frank Act, many bankers are still anxious as they wait for some rules to be written and others to be implemented. Yet a new set of regulatory and legislative challenges looms.
September 23 -
Everett Stern, who worked at HSBC Bank USA for two years, has given federal authorities emails and other documents that, he says, show HSBC committed anti-laundering violations beyond those covered by its $1.9 billion settlement. He has urged them to open a new investigation.
August 30 -
The Fed's foreign bank regulation proposal may make sense, but it appears to signal that global standards are giving way to an every-country-for-itself approach.
January 9 -
HSBC's record-setting $1.92 billion penalty for a slew of anti-money laundering problems surprised many in the financial industry, who warned it could set a new precedent for targeting other institutions.
December 11 -
The industry must work much harder to restore its reputation after this year's scandals, HSBC USA CEO Irene Dorner said Tuesday, in a speech that was part rally and part reprimand to bankers.
October 17
WASHINGTON HSBC's Irene Dorner has a message for banking regulators tasked with writing the rules designed to prevent the next financial crisis: get on with it.
While Dorner, the chief executive of HSBC USA, says she firmly believes that stricter regulation is crucial to strengthening the banking system and winning back customers' trust, she like many bankers remains frustrated by the glacial pace of the rulemaking.
Delays in implementing the Volcker Rule a key provision in the Dodd-Frank Act that will restrict banks' proprietary trading and the uncertainty surrounding capital rules are draining banks of resources that could otherwise be used to stimulate economic growth, Dorner said at American Banker's Regulatory Symposium here Tuesday.
Dorner noted that HSBC is spending "millions of dollars" in consulting fees and lamented that some of its most talented bankers are spending far more time preparing for all potential regulatory outcomes than meeting with existing or potential clients.
"The consequence is that there is less capacity to do the things we should be doing for our customers and the economy," she said.
Dorner was one of two bank CEOs to deliver keynote addresses at the two-day conference and, like Monday's speaker,
"Changing midway is destructive," Dorner said. "These are the right rules and I think we should see them through."
Still, Dorner believes that there's much to fix in the regulatory system. A big reason why rules take so long to write is that many are overly complex and often require input from multiple agencies, Dorner said. As she sees it, regulators and bankers share a common goal of protecting and rebuilding trust but she is concerned that, in the flurry of rulemaking, regulators sometimes don't see the forest through the trees.
"It's about painting a picture of what success looks like," Dorner said.
Dorner contends that banks can play a crucial role in improving the rulemaking process by being more cooperative and less adversarial. Much of the industry reaction to new rules and regulations is knee-jerk opposition, when a better approach would be "constructive engagement," Dorner said.
"We forget that, at the end of the day, we're all on the same side," she said.
Collaboration, though, works both ways. On the issue of preventing money laundering, Dorner noted that banks provide regulators with huge amounts of data on suspicious transactions but that regulators rarely share the information gleaned from it. If, for example, banks had access to the information more quickly they could work with regulators to potentially thwart financial crimes.
"The authorities know who the bad guys are and we want to know, too," she said. "With better information we can better spot them."
Money laundering is an issue of particular concern to HSBC, which
Dorner has called its money laundering problems "self-inflicted" and said that fixing its internal controls is a top priority. HSBC is making progress on that front, but "we still have much changing to do before I'm satisfied," she said.
Apart from improving its compliance efforts, HSBC USA has also been shedding business lines in the U.S. that were peripheral to its primary mission of facilitating global trade. The bank is a unit of a global behemoth with $2.6 trillion of assets and operations in 80 countries and territories, and its main objective is to "connect customers to global opportunities and be where the growth is," Dorner said.
Dorner contends, though, that the bank's business model and global trade in general are threatened by what she views as lack of cooperation among international regulators. Most countries are largely focused on protecting their home banks and the result, she said, are inconsistent rules that will ultimately inhibit the flow of capital and restrict international commerce.
"We're at the risk of descending into a regulatory balkanization, with each country acting to protect its in-country banks and not the global financial system," she said.
Dorner added that it is up to bankers to persuade international regulators to work with one another.
"This is so important that we can't give up," she said. "If we don't get this right, we are putting our economy at risk."
