HSBC's Saudi Division Made $42 Million Provisions to Pay Fines

  • Bank won't elaborate on settlement of `historical issues'
  • Saudi regulator had blocked HSBC new fund inflows in 2014-15

HSBC Holdings Plc’s Saudi unit made provisions of 162 million riyals ($42 million) over the past two years to pay levies imposed for breaching regulations over 12 years and cover the expense of future fines, according to financial statements published on its website.

HSBC Saudi Arabia Ltd. made the provisions for the “settlement of historical issues, mainly relating to the period 2002 to 2014, identified as a result of various Capital Market Authority inspections,” and to cover the “high degree of uncertainty as to the terms on which remaining issues would be resolved and the timing of such resolutions,” according to the financial statements. The bank declined to elaborate.

In 2014, HSBC was blocked from taking in new funds at its Saudi asset-management business after local regulators found that it breached local rules, people familiar with the matter told Bloomberg in April last year. The ban was lifted in July 2015, a spokesman for HSBC Saudi Arabia said Thursday, declining to give more details on what regulations were breached.

The Saudi fines add to the weight of scrutiny HSBC has faced from regulators around the globe. The bank paid a $1.9 billion settlement in 2012 to end U.S. probes into money laundering, and paid $618 million in fines in 2014 after an investigation into the rigging of foreign-exchange benchmarks.

An independent report on HSBC’s Saudi operations produced by PwC made 185 recommendations on improving risk management and compliance. As of March 21, 95 percent of these recommendations have been implemented, the HSBC Saudi Arabia spokesman said.

HSBC made a profit of 279 million riyals in the oil-rich kingdom last year, up from 229 million riyals in 2014. Saudi Arabia is one of HSBC’s 19 priority growth markets, along with Egypt, the United Arab Emirates, India, mainland China, the U.S. and Brazil, according to the London-based bank’s annual report.

HSBC Saudi Arabia is 49 percent owned by HSBC Asia Holdings, with the rest held by SABB, the Saudi Arabian affiliate of HSBC. HSBC also owns 40 percent of SABB.

Before it's here, it's on the Bloomberg Terminal.