When I read this headline: “HSBC Bank on Verge of Collapse: Second Major Banking Crash Imminent”, reported here, I became a lot concerned.

Last Friday, iacknowledge.net wrote that concerns about an imminent bank crash were further fuelled with the emergence of news that HSBC are restricting the amount of cash that customers can withdraw from their own bank accounts. The article said that customers have been told that without proof (with relevant documentation) of the intended use of their own money, HSBC would refuse to release it.  This, says the article, and other worrying signs point to a possible financial crash in the near future.

It seems that many banks have this policy in their terms and conditions but rarely apply it. When they do, they simply ask what the withdrawal funds are going to be used for. Maybe HSBC do the same, particularly where the size of the withdrawal is out of character with previous transactions on the customer’s account. There’s more on this in a report by the BBC’s MoneyBox Programme.

Over the weekend, HSBC staff have been told that they should not deny customers access to their own cash unless they suspect financial crimes, according to CITY A.M., here. There’s a good commentary on this point here in an article titled: How easy is it to get your money out?

The iacknowledge article referred to above says “HSBC is scrambling to manage a seemingly terminal liquidity crisis (a lack of hard cash) that could see the bank become the next Northern Rock – and trigger a bank crash.  The analyst’s advice is for shareholders to sell HSBC investments, and customers to move their accounts elsewhere before the crash.”  That sounds quite worrying. The last thing we want in the UK is for our biggest bank to require taxpayers to finance another bailout.

Delving deeper, I found that on 16 January, in a report in the Telegraph, Harry Wilson wrote that “research firm Forensic Asia calculates that HSBC has overstated the value of the assets on its balance sheet by more than £50bn and will ultimately need a capital injection of close to £70bn before the end of this decade, according to an incendiary report published by a Hong Kong-based research firm. Forensic Asia on Tuesday began its coverage of Britain’s largest banking group with a ‘sell’ recommendation, warning the lender had between $63.6bn (£38.7bn) and $92.3bn of “questionable assets” on its balance sheet, ranging from loan loss reserves and accrued interest to deferred tax assets, defined benefit pension schemes and opaque Level 3 assets. The broker’s note is written by two of its senior analysts, Thomas Monaco and Andrew Haskins”: see here.

Digital Look also commented on this story, here: “… reports are citing research from Forensic Asia according to which HSBC has not made the necessary adjustments during the “quantitative reprieve” to rectify its capital issues. The result has been extreme earnings overstatement, causing HSBC to become one of the largest practitioners of capital forbearance globally. This charade appears to be ending, given how few earnings levers remain besides selling off core elements of the franchise and the stringencies of Basel III compliance.”

By the way, the Forensic Asia article is here.

I did note that according to globalpost.com last week, HSBC is paying $2 billion (now that’s a lot of money in any currency), to avoid criminal charges in a drug cartel laundering case, reported here, and “the US Justice Department has agreed to suspend criminal charges against the world’s largest bank and its US subsidiary for five years if the bank agreed to pay the penalty”.

Then this morning I read in a further iacknowledge article that a variety of sources including Forbes, Max Keiser, and FXstreet (Forex) are reporting on a Bank of China announcement suspending all cash transfers for the next several days.  The Forbes report states: “The People’s Bank of China, the central bank, has just ordered commercial banks to halt cash transfers. In short, there will be a three-day suspension of domestic renminbi transfers. There will also be a suspension, spanning nine calendar days, of conversions of renminbi to foreign currency. The specific reason given—“system maintenance” at the central bank—is preposterous.  It is not credible that during the highest usage period in the year—the weeklong Lunar New Year holiday beginning January 31—the central bank would schedule an upgrade and shut down cash transfers. A better explanation is that the country’s banking system is running dry.”

Iacknowledge is reporting that HSBC look likely to require a bail-in by customers, or a bail out by the Chinese state in the near future, due to the $80bn shortfall in cash.  With China now on the brink of a currency crisis, and holder of $1.3trn of US debt, we might want to brace ourselves for a distinctly stormy economic situation, imminently.

I don’t know what is going on or rather what went on in relation to these matters but it would have been comforting if HSBC itself had said something to reassure its customers. And I haven’t seen anything yet from the FCA or the Bank of England either – but I may have missed it

I’m worried. And perhaps you should be too.

Martin Pollins

Martin Pollins

Managing Director at Bizezia
Martin Pollins is a Chartered Accountant with wide experience in corporate finance and business management. He holds a number of directorships and has served on the boards of several companies, including those listed on the London Stock Exchange, AIM and OFEX.

He was a Council member of the Institute of Chartered Accountants in England and Wales from 1988 to 1996.

Martin Pollins ran his own firm based in Sussex and was the first Accountancy firm in the UK to advertise on television and Martin went on to create and launch the CharterGroup Partnership (the UK's first Accountancy network) and then LawGroup UK (one of the largest networks of lawyers in the country).

Martin started work on the Bizezia concept in 1996, developing the broad range of information resources and products over the past 18 years.
Martin Pollins
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