INTERVIEW | Andrew C Beane: High standards protect reputation for the long-term

HSBC has seen its profits drop by 23% for the financial year which ended in December 2018. While the results were blamed on low interest rates and excess liquidity in the market, you, as CEO, also warned about the dangers to the local financial services sector due to reputational damage to Malta. Do you believe Malta’s reputation has been damaged severely? What would you like to see improving when it comes to the upholding of anti-money laundering standards in the financial industry?

HSBC Malta’s 2018 results reflected the impact of planned investments in compliance, the full year effect of associated risk management actions, positive reductions in non-performing loans and the impact of a low interest rate environment.  HSBC Malta is well placed to navigate the current and future operating environment.  

We believe that HSBC Malta’s high standards give confidence to our shareholders, customers and employees and although, as expected, profitability has reduced, these strengths have enabled the bank to continue the generation of dividends for shareholders.

More broadly, the banking industry operates on an agreed set of international compliance standards that determine, not only how accounts are opened but also the manner in which domestic and international trade and capital flows are facilitated.

Where regulatory standards are met, the economic flows and activities facilitated by banks are smooth and predictable.  Where there are gaps in the achievement of these standards, there can be consequences both to reputation and to the orderly operation of the financial system.  

It is therefore essential that all market participants operate to the requisite standards and that these are robustly monitored and enforced.  HSBC Malta welcomes recent announcements by the MFSA to strengthen the local supervisory framework in this regard.

In recent months, local banks have been the subject of criticism – including from the Prime Minister – regarding their reluctance to open corporate bank accounts for foreign companies. Joseph Muscat pointedly said that banks had to be “agents for growth, not safety deposit boxes”. How do you respond to this criticism? Are you planning on addressing the situation whereby foreign companies are encountering significant problems in conducting their business due to local banks’ policies?

HSBC Malta can only comment on its own business.  New accounts for personal customers have increased by around 40% in 2019 and we also continue to open new accounts for companies in line with our risk appetite.

We have in recent years seen the emergence of digital banking alternatives, such as Revolut, which has enjoyed good market penetration in Malta. Do these alternatives pose a challenge to HSBC Malta’s more traditional banking model?

As a subsidiary of the HSBC Group, HSBC Bank Malta p.l.c is proud to have brought a number of innovations to the country in recent years including biometric identity and contactless payments.  

The HSBC Group has a stated strategic intention to invest $15-17 billion primarily in growth and technology between 2018 and 2020 and we are excited to form part of HSBC Group’s digital strategy which will enable us to bring more benefits to our customers in 2019 and beyond.

In addition to our digital solutions we will continue to provide access to in-person expertise, particularly where our customers especially value this, such as when purchasing a property or starting a business.

How is the bank responding to blockchain and distributed ledger technology? It this new tech a threat, or will the bank evolve and embrace it?

The HSBC Group has been testing and implementing distributed ledger technology, commonly known as blockchain, for the last couple of years. Areas such as trade finance and foreign exchange have already shown real commercial potential. Globally, the bank continues to test the benefits of this technology with our customers.

Cyberattacks on banks are a modern day reality. What risks do these pose, and what systems does the bank have in place to detect and avert such attacks?

The security of HSBC’s data and information is of paramount concern to the bank and we maintain a constant vigil to protect our customers and colleagues.  

High property prices in Malta are currently a popular subject of debate. Connected with this, some young professionals and couples are complaining that, despite being relatively young and having good career prospects, they are unable, or are having a difficulty, to secure home loans with banks which are sufficiently high to allow them to purchase their first home. How do you respond to this – would you say the problem stems from the property market, rather than the bank?

HSBC Malta continues to support the property market; for example we saw more than 10% increase in new home loans granted in 2018.  
We are a responsible lender that works closely with our customers to ensure they can afford to repay their home loan which represents a significant long-term financial commitment.  

Where property prices increase faster than salaries over time this should create a ‘natural brake’ on house price appreciation as ultimately the market operates over the long-term based on the capacity of purchasers to afford property that is available for sale.