HSBC’s Lack of Morals

Despite having largely exited retail Islamic Banking by withdrawing its Ammanah offering, HSBC remains a major player in Islamic capital markets as a leading arranger of Sukuk having participated in landmark Islamic finance transactions in the Middle East, Asia and Europe. The latest revelations of alleged criminality against it deeply damage its Islamic finance standing according to a senior Malaysian treasury official, providing a fresh impetus to ban Islamic Banking window operations.

Earlier this week it emerged HSBC had conspired with wealthy individuals in tax evasion at the expense of mostly Western governments. These allegations follow on from previous wrongdoings including money laundering for South American drug cartels, terrorist funding facilitation and a 2012 $1.9 Billion fine to settle US investigations of sanction busting dealing with Iran.

HSBC – Key Sukuk Arranger

Malaysia and Saudi Arabia are the remaining countries within which HSBC Ammanah is offered, with these locations being used to participant in the lucrative sukuk arranger market for which HSBC is amongst the world leaders. In 2014, HSBC participated in arranging a number of landmark sukuk including debut sovereign sukuk issuances from the United Kingdom, Luxembourg and Hong Kong.

Push to Ban Islamic Banking Window Operations

Window based Islamic Banking operations are Islamic Banking services offered by conventional banks, such as HSBC Ammanah. Qatar has banned such window operations, and many industry participants have argued global banking giants such as HSBC and Standard Chartered should be banned from Islamic Banking services as the majority of their operations are considered not compliant with the core principles of the Islamic Economic system.

A senior Malaysian treasury official went further to state “…as Islamic banks such as CIMB Islamic and Emirates NBD continue to develop cross border services and reach, governments and corporates seeking to arrange sukuk will naturally begin turning to fully fledged Islamic banks to assist on Islamic products such as sukuk”. The treasury official went on to state there was growing unease with the likes of HSBC, Standard Chartered and JP Morgan dominating Islamic capital markets.