Revoke HSBC’s Banking Charter

HSBC deserves to have its banking charter revoked, plain and simple.

While America was in a turkey stuffing-induced slumber, HSBC proved through its treatment of Brett King, arguably one of the world’s most forceful proponents for banking innovation, that it does not understand what it means to behave in a responsible fashion. And that means it does not deserve its banking charter.

To recap, King was on his way to his New York home from the airport on Friday morning when he tried to use his HSBC Debit Card, which is linked to his business account. The card was rejected. Thinking it was some sort of fraud stop, he called HSBC, whereupon he was told that his business account was closed. That that business account is presumably attached to King’s banking startup, Moven, or to his consulting business, which aims to help banks become better at banking, makes the episode all the more ironic.

From here, King’s story gets, as someone said on Twitter, Kafka-esque. King says HSBC never notified him that the account would be closed. You may recall that HSBC essentially decided last September to “fire” a large swath of its small business customers, by closing their accounts. King’s account apparently made the cut. Now, HSBC says it sent King a snail-mail letter that it was closing his account — to an address King had changed with the bank a year before. HSBC also sent the funds from the liquidated account to that old address.

When King raised a hackle, because he knows how big banks work — since many of them are his clients, after all — he got nowhere. A call center in Calcutta, India, effectively stymied him. To make matters worse, he tweaked his experience, in real time, to @HSBCUSA, @HSBC_Press, @HSBC_UK_Help and other HSBC-labelled Twitter accounts, but got a response. Here is how it ended for King:

In the end the supervisor called me back about two hours later (that was very high priority, I was assured). The Senior Floor Supervisor was named Nihlanjo, still based in [Calcutta]. Nihlanjo offered the following solution:

• Go into a branch and change your address (again);
• We’ll then be able to send you notification of your closed account;
• We’ll be able to cancel the check we’ve already sent you; and
• Once that is confirmed we’ll send you another check with your funds.

This was the “solution” at 6 pm ET on Friday.

HSBC — and any bank that behaves like this — should have its banking charter revoked. A banking charter is essentially an oligopolistic charter. As King himself knows from his Moven startup, acquiring a banking charter is as difficult as getting elected to the US Senate — only a few make it. With the charter’s great power — as Uncle Ben said to Spiderman — comes great responsibility, and HSBC has shirked that responsibility. Let’s start with the decision to fire its small business customers. I will let King tell you the story:

I asked [the HSBC CSR] what was the reason the account was closed — had I done something to trip the fraud or risk guidelines? Lhakpa read from a prepared script (I know this because I asked her if she was reading it and she said yes, she had to; she wasn’t allowed to put it in her own words) and she explained that due to “a strategic review, HSBC had determined that there were many small business accounts closed due to not being international or multi-national in scope, with too small a balance or not enough transactions.”

Is this how an organization that cares about people behaves? It is clear that HSBC made no accommodation to each of those “small business accounts” to help them find other banks. Without that help, HSBC was heaping a mess of work on each of those small businesses to scurry and find a new bank within a couple of months. HSBC does not deserve a banking charter if it cannot treat its customers — even those it is “firing” with consideration.

Further, even if HSBC aimed to behave in a proper manner, it is evident through King’s experience that it has not invested enough to do so. King gave HSBC every opportunity to quickly make things right. The bank not only did not, but obviously could not. King is logging on to his HSBC online and mobile banking portals regularly. He tweaked to every known HSBC Twitter account. He even guided the CSR on how to properly deal with his query. Nothing. It is now Monday at 9:15 am ET and King told Bank Innovation that he got a call from someone at HSBC on Saturday, yet the matter remains unresolved. If a bank of HSBC’s size does not invest enough into the capabilities to resolve customer problems expeditiously, it does not deserve a banking charter.

Finally, do not for a moment think this is an isolated episode. Last April, we did an analysis of consumer complaints to the Consumer Financial Protection Bureau to determine which of the Top 20 US banks by assets piss off their customers most. Guess which bank was No. 1 in this category? That’s right, HSBC. HSBC receive 107.97 complaints per million accounts. By comparison, Ally Bank registered 7.21 complaints per million accounts. Forget CAMELS rating — if a bank cannot do good by its customers, it should not have a banking charter.

Remember, this is the same HSBC that was fined for its role in the Libor-rigging scandal and for money laundering for al Qaeda. Yes, that al Qaeda. The only way to get the attention of a bank that was holding more than $1 trillion of risk-weighted assets at the end of last year is to revoke its banking charter. Fines of $1 billion here or $1 billion there are not going to do it. Because it is essentially granted an oligopolistic market power, banks can be expected to adhere to a higher standard. HSBC isn’t even close to that — and, in the end, that is the main reason why regulators should revoke its banking charter now.

Read King’s latest account of the HSBC episode here.