May 25, 2012 8:00 pm

HSBC chief urges EU bank bailout scheme

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European leaders should create a vehicle to inject state equity into undercapitalised banks, according to the head of HSBC, the continent’s biggest lender by market value.

“We’re hoping for some form of EuroTarp,” Stuart Gulliver told the bank’s annual meeting on Friday – a reference to a European version of the Tarp bailout structure put in place by the US government in 2009. The money should be handed out via the European Financial Stability Facility or its successor entity, the European Stability Mechanism.

Mr Gulliver’s comments join a crescendo of voices backing the idea, as southern countries in the eurozone struggle to aid of their troubled banks without scaring investors about the health of state finances.

The International Monetary Fund, the European Banking Authority and several European leaders have called for a similar plan, though Angela Merkel, the German chancellor, has remained steadfast in her opposition.

Mr Gulliver, who also said he expected the euro to survive the current crisis, told shareholders he would continue to simplify HSBC, exiting businesses that were insufficiently profitable, and avoiding large-scale mergers or acquisitions.

He doubled the target – to $2bn – that he aims to extract in additional revenues from making the various parts of HSBC’s global network operate effectively together. “We see strong potential for increasing referrals and cross-selling,” he said.

In contrast to several other banks in the UK, US and continental Europe, HSBC avoided a mass backlash against pay deals for top staff.

Nearly 14 per cent of shareholders did not support the bank’s remuneration report, including 10 per cent who actively voted against, just over half the tally of a year ago.

At Barclays last month nearly a third of investors failed to support the bank’s remuneration report. There were similar rebellions at Swiss banks UBS and Credit Suisse. Citigroup’s pay plans were voted down by shareholders.

Investors’ attitudes to HSBC’s pay have softened following moves to restructure awards, obliging senior executives to hold long-term incentive packages until retirement and make them more transparent.

Overall, Mr Gulliver’s pay for 2011 was £7.16m, down from £8.35m in 2010 when he was head of the investment banking division.

The lower bonuses reflected a £10.5m fine for mis-selling investment bonds to elderly people last year, which Mr Gulliver previously described as “disgraceful”.

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