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A DBRS headline states that DBRS Places HSBC Bank Canada Under Review with Negative Implications but details are Top Secret and available for subscribers only.

DBRS simultaneously placed HSBC USA Inc. and HSBC Bank USA, NA under review negative:

The ratings action follows DBRS’s placement of its ratings for HSBC Holdings plc (HSBC or the Group – rated AA (high)), HUSI’s and HBUS’s ultimate parent, Under Review with Negative Implications. Separately, DBRS has withdrawn its ratings on HUSI’s FDIC-guaranteed debt as this debt has been repaid.

The placement of HSBC’s ratings Under Review was driven by the combination of more detailed revelations of the Group’s historic missteps in relation to certain regulatory and legal issues, as well as the changed environment that poses greater challenges to HSBC’s franchise and credit fundamentals.
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The review will focus on HSBC Holdings plc’s prospects for ensuring that it delivers on improved controls to prevent future missteps. The review will also consider the evolving LIBOR/EURIBOR investigations and the more negative environment for large banking organizations. Among the consequences, HSBC’s organization and credit fundamentals could be impacted through increased compliance costs, added fees, limits on pay, increased capital requirements and ring-fencing that could disrupt the efficient operation of a global universal bank.

The missteps referred to are almost certainly the results of the US Senate probe:

HSBC’s U.S. unit “offers a gateway for terrorists to gain access to U.S. dollars and the U.S. financial system,” according to the subcommittee’s report.

The lender ignored links to terrorist financing among its customer banks, including Riyadh, Saudi Arabia-based Al Rajhi Bank (RJHI), which had ties to terror groups through its owners, the report said.
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The report also cited HSBC’s violations of Treasury Department sanctions on dealings with Iran.
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An outside audit by Deloitte LLP showed that 25,000 transactions totaling more than $19.4 billion involved Iran, according to the report. Of those, as many as 90 percent passed through the bank’s U.S. accounts with no disclosure of ties to Iran, the report shows. Senate investigators documented similar transactions involving North Korea, Cuba, Sudan and Burma.

Bank documents also showed HSBC’s U.S. unit cleared transactions through at least six Iranian banks.

HSBC Bank Canada is the issuer of HSB.PR.C, HSB.PR.D (both DeemedRetractibles) and HSB.PR.E (FixedReset). All are tracked by HIMIPref™ and assigned to the indicated subindices.

This entry was posted on Friday, July 20th, 2012 at 1:38 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.