It seems that HSBC (and indeed many other financial institutions) may owe Mr Osborne a degree of gratitude after it was revealed that he intervened to prevent criminal charges against the bank.
In 2012 HSBC entered into a deferred prosecution agreement (DPA) with the US Department of Justice (DoJ). A US House committee report revealed that at the time the DoJ had been considering criminal charges in addition to the financial penalty it imposed against HSBC in December 2012.
Mr Osborne advocated against the criminal charges as he was concerned about the impact of a criminal case against the country’s biggest bank on the economy. If HSBC were found guilty of criminal charges there would be a serious risk that US regulators would revoke their licence to conduct business. His argument was supported by the then UK regulator, the Financial Service Authority.
Interestingly Mr Osborne was able to approach the head of the Federal Reserve to discuss scaling back punishments for British banks. In the US the DoJ is able to negotiate its own DPA's. In contrast to the US model, a UK prosecutor such as the SFO must secure the approval of a Crown Court judge and the Court must be satisfied that the DPA being entered into is in the interests of justice and is fair, reasonable, and proportionate.
It seems that this is a case where politicians won the day. However it is interesting to ponder that if a investigation was conducted in the UK by the SFO against a US bank and the US government made similar pleas, would a UK judge think it fair, reasonable and proportionate to allow a DPA?
George Osborne intervened to talk down the punishment handed to HSBC by US authorities after the bank breached sanctions and money laundering rules, according to a new US congressional report. HSBC, which agreed to pay a record-breaking $1.92bn (£1.46bn) in a deferred prosecution agreement in December 2012, was spared criminal charges after the UK raised fears of a “global financial disaster”, the report from US Republicans on the financial services committee said. The Chancellor contacted Ben Bernanke, who was then chairman of the Federal Reserve, to discuss scaling back the punishments against British banks two months before HSBC’s deferred prosecution agreement was announced. At the time, US regulators were also weighing up whether to strip Standard Chartered of its banking licences over its dealings with sanctioned Iranian clients.