SEC Revokes Registration of Republic New York Securities Corp., a Broker-Dealer Pleading Guilty to Securities Fraud in Related Criminal Action

FOR IMMEDIATE RELEASE
2001-148

Washington, DC, December 17, 2001 — The Securities and Exchange Commission announced today that it has issued an order revoking the registration of Republic New York Securities Corp., a New York-based broker-dealer registered with the Commission since 1992. Republic Securities is now a subsidiary of HSBC USA, formerly Republic New York Corporation.
The Commission found that Republic Securities violated federal securities laws by participating in a massive Ponzi scheme operated by Martin Armstrong. In September 1999, the Commission charged Armstrong and two companies he controlled, Princeton Economics International and Princeton Global Management, in an emergency action alleging that they defrauded scores of Japanese companies that had invested billions of dollars in Princeton Global Management notes. Armstrong, who was indicted by a federal grand jury in New York, was also charged by the Commodity Futures Trading Commission.

In the parallel criminal proceeding, the Office of the United States Attorney for the Southern District of New York today announced a guilty plea by Republic Securities. As part of the resolution of the criminal case, Republic Securities has agreed to pay $606 million in restitution to defrauded investors. The Commodity Futures Trading Commission also announced a related enforcement action against Republic Securities today. In settling the Commission's enforcement action, Republic Securities neither admitted nor denied the Commission's findings.

The Commission found that from 1995 through 1999 Republic Securities engaged in a fraudulent scheme involving hundreds of accounts opened by Armstrong at Republic Securities for investors' funds. As set forth in the Order, which is available on the Commission's website, the Commission found:

The Princeton Global Management notes were marketed in Japan as safe investments, handled by a successful commodities trader. According to sales materials provided to investors, their funds would be secure in segregated accounts maintained at a broker-dealer affiliated with a prominent, well-capitalized bank, then known as Republic National Bank.

In truth, Armstrong was far from successful, losing over a half-billion dollars of investors' funds in risky commodities trading. Despite his poor performance, Armstrong paid himself huge management and performance fees, buying valuable gold treasures and a broker-dealer in Tokyo with investors' funds.

Republic Securities, acting by and through its President, and the President of its Futures Division, was an active participant in Armstrong's fraudulent scheme. Specifically, Republic Securities:

Provided Armstrong with over 200 letters, the majority of which materially overstated the Net Asset Value of account balances relating to investors' funds;

Entered into "fiduciary agreements" with issuers of the Princeton Global Management notes which were used by Armstrong to assure investors that Republic Securities and Republic National Bank were safeguarding investors' funds;

Persuaded Armstrong to use accounts holding investors' funds as collateral for the huge negative balances in his trading accounts, and then to transfer cash balances to the trading accounts, thereby commingling investors' funds; and

Provided Armstrong with false and misleading letters to Armstrong that he used to conceal the fraud from the Japanese Financial Supervisory Agency, which was investigating the notes in Japan.

By these fraudulent acts, Republic Securities directly committed securities fraud, in violation of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5.
The Commission revoked the firm's registration as a broker-dealer. In recognition of the restitution paid by the firm in the criminal case, which far exceeded the firm's profits from its handling of Armstrong's account, and the firm's cooperation with the Commission's investigation, the Commission did not seek or obtain monetary sanctions from the firm. Separately, the Commission issued a temporary order exempting Republic Securities' new parent, HSBC, as well as HSBC Asset Management from the provisions of Section 9(a) of the Investment Company Act.

Wayne M. Carlin, Regional Director of the Commission's Northeast Regional Office, pointed to the significant contributions of the U.S. Attorney's Office for the Southern District of New York, the Commodity Futures Trading Commission, the Federal Bureau of Investigation, the Federal Reserve Bank of New York and the Japanese Financial Services Agency ("FSA") in the coordinated investigations that preceded today's announcement. "From the moment we learned that the FSA had questioned NAV letters from Republic Securities, we joined our fellow regulators to get to the bottom of the problem. With the FSA's assistance, we were able to overcome language and other barriers, and work speedily with the CFTC to freeze existing funds at Republic Securities. It is truly gratifying to join with the U.S. Attorney's Office and the CFTC in announcing this resolution. The public interest is obviously served when the victims of criminal conduct are compensated, without the drain of expensive litigation. Moreover, the historic size of the restitution order stands as a warning to regulated entities of the consequences that can ensue if they permit their facilities to be misused in aid of wrongdoing."

For further information, please contact:

Wayne M. Carlin
Regional Director
Northeast Regional Office
646-428-1510

Dorothy Heyl
Senior Trial Counsel
Northeast Regional Office
646-428-1758

* Additional materials: Release No. 34-45157

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Modified: 12/17/2001
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 45157 / December 17, 2001
Administrative Proceedings
File No. 3-10653


In the Matter of

REPUBLIC NEW YORK SECURITIES CORP.,

Respondent.
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ORDER INSTITUTING PUBLIC ADMINISTRATIVE PROCEEDINGS PURSUANT TO SECTION 15(b) OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTION
I.

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that a public administrative proceeding pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") be, and hereby is, instituted against respondent Republic New York Securities Corp. ("Republic Securities").

II.

In anticipation of the institution of this administrative proceeding, Republic Securities has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings contained herein, except as to the jurisdiction of the Commission over Republic Securities and over the subject matter of these proceedings, which is admitted, Republic Securities consents to the entry of the findings and the imposition of the remedial sanction set forth herein.

III.

On the basis of this Order and the Offer submitted by Republic Securities, the Commission finds that:1

SETTLING RESPONDENT

1. Republic Securities has been registered with the Commission as a broker-dealer since January 22, 1992, and is also registered with the Commodity Futures Trading Commission as a Futures Commission Merchant.

OTHER RELEVANT PERSONS AND ENTITIES

2. Martin Armstrong ("Armstrong"), age 50 and a resident of Maple Shade, New Jersey, during the relevant time, owned and controlled a series of limited liability companies formed in the Turks and Caicos Islands, British West Indies, that were headquartered in Princeton, New Jersey. These entities included Princeton Economics International, Ltd. ("PEI"), an investment adviser, Princeton Global Management, Ltd. ("PGM"), and a series of special-purpose companies that issued notes to investors ("Princeton Notes") and received investor proceeds and deposited them into Republic Securities.

3. Cresvale International Limited Tokyo Branch ("Cresvale Tokyo"), a corporation organized under the laws of Japan, is a wholly owned indirect subsidiary of Cresvale Far East Ltd. which is, in turn, a wholly owned indirect subsidiary of PEI. Cresvale Tokyo was a registered securities dealer in Japan and marketed the Princeton Notes issued by the PGM subsidiaries to Japanese investors.

INTRODUCTION

4. For approximately four years, Republic Securities knowingly participated in a fraudulent investment scheme by Armstrong. Throughout the course of the fraudulent scheme, hundreds of millions of dollars entrusted to Armstrong by Japanese companies and deposited in special-purpose accounts at Republic Securities were dissipated as a result of Armstrong's unsuccessful futures trading strategy and diversions to companies controlled by Armstrong. Republic Securities participated in Armstrong's concealment of this fraud and continued solicitation of new investments by, inter alia, providing more than 200 letters concerning the Net Asset Value of the accounts at Republic Securities. These NAV letters, the majority of which directly misrepresented account balances, also failed to disclose the commingling of accounts and use of investor funds to collateralize negative balances in trading accounts. Republic Securities also directly misrepresented account balances to an investor who visited Republic Securities' office, and provided documents that were used by Armstrong to mislead the Japanese Financial Supervisory Agency ("FSA").

ARMSTRONG'S FRAUDULENT NOTE SCHEME

5. From at least June 1992 through August 1999, Armstrong sold billions of dollars worth of Princeton Notes to Japanese investors on the premise that he was a successful commodities trader whose knowledge of world currency moves would ensure safe, profitable investments. Armstrong promised investors healthy returns on safe investments, but instead dissipated investor assets through risky trading and other diversions of assets.

6. The Princeton Notes were issued by a series of special-purpose companies formed in the Turks and Caicos Islands ("Princeton Issuers"). Each Princeton Issuer was named "Princeton Global Management" followed by an alpha-numeric denomination. The Princeton Issuers issued two types of notes: "variable" and "fixed rate." The variable notes were redeemable at maturity for their "net asset value," i.e., the value at maturity of the trading fund underlying the notes. The fixed rate notes were redeemable at maturity for their face value and paid a guaranteed rate of interest. Armstrong represented to investors that he would open individual accounts for each of the PGM Issuers, but in many instances failed to follow through on that promise. From early 1995 through 1999, these accounts were maintained at Republic Securities.

7. Armstrong, directly and through PEI, PGM, and Cresvale Tokyo, represented to investors that the proceeds of the fixed rate notes would be invested mainly in U.S. Government Agency Bonds, with a portion of the funds being used to place a hedge against the foreign exchange risk presented by the movements in the Japanese Yen against the U.S. Dollar. In the case of the variable notes, Armstrong represented that 70% of the proceeds would be invested in U.S. Government Agency debt instruments with the remainder being used to invest in currency, bonds, stock or other instruments, primarily using index funds and options. In both cases, marketing materials claimed that "the overriding principle behind Princeton's approach to managing funds for clients is the preservation of the client's capital," and that the basic approach to fund management and investment was extremely conservative.

8. Armstrong bolstered his representations about the safety of the Princeton Notes by deliberately confusing Republic Securities with its affiliate Republic Bank, pointing to the bank's capitalization, large gold reserves, and bond rating. In addition, Armstrong persuaded Republic Securities to execute agreements for each Princeton Issuer account entitled "Supplement to Customer Agreement dated _____ covering Fiduciary Responsibilities, Payments of Fees and Relationship to Investment Manager" ("Fiduciary Agreements"). Armstrong used these agreements to bolster representations to investors that "Republic is fully aware of the fiduciary responsible [sic] they take on when they issue a receipt of deposit and sign the fiduciary agreement."

9. Armstrong also represented to investors that Republic Securities would hold the proceeds of each note in a segregated account and provided investors with receipts that identified the receiving accounts at Republic Securities as "Customer Segregated Funds Account[s]." Armstrong told investors that the "segregated" accounts would protect them in the event that Republic Securities filed for bankruptcy and that "PEI is not permitted to wire funds from the account to anyone other than the original source."

10. Armstrong's representations concerning the safe and conservative nature of his investment strategy were false. Rather than investing solely in U.S. Government Agency debt instruments, Armstrong also traded currencies, metals, bonds, options and futures. Armstrong's trading losses from this risky and speculative trading were staggering: From 1995 through 1999, Armstrong incurred in excess of $550 million in net trading losses and costs.

11. In addition, beginning in at least 1995, Armstrong commingled the investor funds and moved cash and securities among the various Princeton-related accounts without regard to the promises made to investors about the segregation of accounts. The Temporary Receiver appointed by the Court for PEI ("Temporary Receiver") has found that Armstrong transferred approximately $282 million from the Princeton Issuer accounts to PEI's account, ostensibly as management fees and performance fees. Pursuant to the standard terms of the Princeton Notes, PEI would not have been entitled to the vast majority of these fees in light of the results of Armstrong's trading. According to the Temporary Receiver, Armstrong also diverted approximately $169 million directly from the Princeton Issuers accounts to his own personal benefit. These funds were used to purchase Cresvale Tokyo, purchase a gold mine in Australia, operate Armstrong's research firm, and purchase gold bars, bullion and antiquities.

REPUBLIC SECURITIES' PARTICIPATION IN ARMSTRONG'S SCHEME

12. Republic Securities, acting by and through its President, the President of its Futures Division ("Futures President"), and other Futures Division personnel, was an active participant in and beneficiary of Armstrong's fraudulent scheme.

A. Beginning in November 1995 through July 1999, Republic Securities prepared and delivered over 200 letters addressed to Armstrong or Princeton Issuers which purported to set forth the net asset value of a particular Princeton Issuer account as of a specified date. The majority of these letters materially overstated the account balance. These letters were prepared and signed by the Futures President and his assistant, who knew that Armstrong planned to show the letters to investors and that the letters were false.

B. In the case of one investor, the Futures President and his assistant misrepresented the value of that investor's account directly to representatives of the investor who visited the United States annually to check on the status of their investment.

C. Members of the Futures Division, including the Futures President and the Operations Manager of the Futures Division ("Futures Operations Manager"), enabled Armstrong to commingle funds among the various accounts and divert funds to his own benefit, even though Republic Securities knew from the Fiduciary Agreements that Armstrong was representing that the funds would be held in segregated accounts. In fact, the Futures Operations Manager, in consultation with Armstrong, created a series of eight trading accounts to consolidate Armstrong's risky trading in one place, thereby commingling the Princeton Issuer accounts inseparably.

D. Armstrong's trading losses and his practice of making payment of principal and interest to Japanese investors out of one of the trading accounts caused large negative balances in the trading accounts. By April 1998, the negative balances totaled approximately $329 million. Following an account review in August 1998, Republic Securities acted to protect its own interest and demonstrated an indifference to the interests of investors. Republic Securities selected 15 individual PGM Issuer accounts with balances over $230 million and demanded that Armstrong sign a guaranty on their behalf securing the negative balances in the trading accounts. This guaranty was contrary to the covenants to the note holders and was not disclosed to them. Republic Securities did not take sufficient steps to determine whether Armstrong had the legal authority to sign the guaranty. Subsequently, Republic Securities created a series of sub-accounts that were ostensibly part of a master account in the name of Princeton Global Management and, as authorized by Armstrong, transferred the balances in the individual Princeton Issuer accounts to the newly created sub-accounts. Despite this new account structure, Armstrong continued to issue Princeton Notes on the same terms (i.e., as purportedly segregated accounts) and Republic Securities continued to execute Fiduciary Agreements and provide false NAV letters. After months of pressure by Republic Securities to convince Armstrong to reduce the negative balances in the trading sub-accounts, in July and August 1999, Armstrong authorized Republic Securities to transfer approximately $500 million of cash balances from the Princeton Issuer sub-accounts to the trading sub-accounts.

E. In March 1999, the Futures President prepared two letters for Armstrong to present to investors to bolster Armstrong's representations that the investor funds were held in segregated accounts. The first letter was addressed "To whom it may concern" and stated that PGM maintained two types of accounts at Republic Securities: trading accounts and non-trading accounts that invested solely in fixed-rate instruments. The letter went on to state that "[a]ny hedging that Princeton does for its Yen exposure takes place in its own account using its credit lines at the bank. No other trading takes place in the fixed rate note accounts." The second letter stated that two specific accounts were "segregated and not commingled with any other PGM account" and repeated the disclaimer about PGM's hedging activity. These letters were false. All of the Princeton Issuer sub-accounts were used to collateralize the negative balances in the trading sub-accounts.

F. Finally, in July 1999, Republic Securities provided Armstrong with a letter signed by its president that falsely stated that the Futures President had authority to sign net asset value letters. In addition, in August 1999, the Futures Operations Manager prepared a letter which stated that the balance in certain PGM accounts as of March 31, 1999 was approximately $369 million, but omitted to state that those accounts were collateralizing the trading accounts at that time and that the true net value in all of the Princeton accounts was only approximately $16 million. Armstrong provided both of these letters to the FSA in an effort to conceal his fraudulent activities.

13. From 1995 through 1999, the Futures Division was the most profitable business sector at Republic Securities and the fees related to Armstrong's business accounted for virtually all of the Futures Divisions revenues. From 1995 through 1999, commissions and fees from Armstrong's business totaled approximately $35 million.

ARMSTRONG'S FRAUD UNRAVELS

14. In late August 1999, a senior official at Republic Securities' parent company learned about the FSA inquiry. Following an internal investigation, Republic Securities and its parent company notified law enforcement about the FSA inquiry and the discovery of a large number of false NAV letters.

15. On September 13, 1999, the Commission instituted a civil injunctive action in the United States District Court for the Southern District of New York against Armstrong, PEI, and PGM, alleging that they violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5. SEC v. Princeton Economics Int'l, Ltd., 99 Civ. 9667 (RO). The action seeks preliminary and permanent injunctive relief, disgorgement plus prejudgment interest, civil penalties, an asset freeze, an accounting, appointment of a temporary receiver, repatriation of assets, and expedited discovery. The Court has granted the Commission's motion for interim relief and has appointed a temporary receiver. In addition, the Court has entered an order holding Armstrong in civil contempt based upon his failure to return certain property to the receiver. Armstrong is currently incarcerated pursuant to that order.

16. Also on September 13, 1999, Armstrong was arrested on criminal fraud charges and, on September 29, 1999, Armstrong was indicted by federal grand jury in the Southern District of New York on 14 counts of conspiracy, securities fraud, and wire fraud. United States v. Armstrong, 99 Cr. 997 (LMM).

17. At least 55 defrauded investors have filed lawsuits against Armstrong, the Princeton entities, Republic Securities, officers of Republic Securities and Republic Securities' parent company seeking to recover the losses caused by their investments in the Princeton Notes.

18. On December 17, 2001, Republic Securities entered a plea of guilty to federal charges of securities fraud and conspiracy to commit securities and commodities fraud and agreed to the entry of an order directing Republic Securities to pay restitution totaling approximately $606 million. Republic Securities' parent company has agreed to pay to certain defrauded investors the difference between the restitution amount and Republic Securities' available capital in exchange for releases by those investors.

REPUBLIC SECURITIES' LIABILITY

By reason of the foregoing, Republic Securities willfully violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5.

IV.

On the basis of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in the Offer submitted by Respondent Republic Securities. In determining to accept the Offer, the Commission considered remedial acts promptly undertaken by Respondent and cooperation afforded the Commission staff.

ACCORDINGLY, IT IS ORDERED that Republic Securities' registration as a broker or dealer be, and hereby is, revoked.

By the Commission.

Jonathan G. Katz
Secretary

Footnote

1 The findings herein are made pursuant to the Offer submitted by Republic Securities and are not binding on any other person or entity in this or any other proceeding.

http://www.sec.gov/litigation/admin/34-45157.htm
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HSBC to Pay $10.3 Billion For Republic
By ALAN COWELLMAY 11, 1999

HSBC Holdings P.L.C. announced today that it would purchase the parent company of the Republic National Bank of New York for $10.3 billion cash, the biggest foreign takeover deal for an American banking company.

The purchase of the Republic New York Corporation and an affiliate by HSBC -- an international banking group based in London with antecedents in Hong Kong and Shanghai -- would double the size of HSBC's private-banking business. It would also give HSBC the third-biggest retail branch network in the New York region, serving lower- and middle-income customers with low-cost checking and free automated teller machine services.

Banking industry analysts said the deal largely reflected HSBC's efforts to expand its highly profitable private-banking operations, which serve very wealthy clients.

''Strategically it fits,'' said James Johnson, an analyst with Credit Lyonnais Securities. ''It complements them in an area they have been pushing: wealth management.''

The deal would likely result in layoffs at Republic's New York operations to eliminate duplication with HSBC Bank USA, the network of American branches formerly known as Marine Midland. Analysts also said that the effects of the deal on Republic's less affluent customers remained unclear, with the possibility of new services and higher fees. [Page C6.]

Republic's sale would mark the end of independence for a banking business founded more than three decades ago by Edmond Safra, a Lebanese-born Jewish businessman who is regarded as an enduring figure in the banking world.

Mr. Safra, 66, suffers these days from Parkinson's disease, a neurological disorder, and there had been growing speculation in recent days that he might sell. Republic's stock rose 14 percent on Friday, and HSBC's purchase plan was reported on Sunday evening by Bloomberg News.

Under the $72-a-share agreement, HSBC is buying the Republic New York Corporation and an affiliated company, Safra Republic Holdings S.A., the parent of banks that serve clients in havens like Switzerland, Luxembourg and Monaco.

HSBC has grown aggressively out of its roots in the colonial Hongkong and Shanghai Bank. It is now a major competitor in the business of managing money for the wealthy, a profitable business that helps offset the risks in such other operations as loans to emerging-market countries of Asia.

The deal would surpass the previous record for a foreign takeover of an American bank, the $10.1 billion purchase of Bankers Trust by Deutsche Bank announced late last year. It would also be HSBC's biggest purchase since it acquired Marine Midland Bank of Britain for $6.1 billion in 1992, which led to the relocation of its headquarters from Hong Kong to London.

The combined HSBC and Republic would have assets of $554.4 billion and currently employs 136,700 people. HSBC said that it would finance the purchase partly through through borrowing and a $3 billion stock sale, and that the deal would eventually result in $300 million annual savings.

Its spokesman, Adrian Russell, said the move would maintain the bank's stated intention to balance its holdings in the industrial world with investment in emerging markets. And, he said, ''It gives us an extra million customers in the world's biggest economy.''

The acquisition requires regulatory approval in Britain, the United States, Hong Kong and elsewhere, but Mr. Russell said HSBC hoped to complete it by the end of the year.

HSBC announced last year that it would list its shares for trading in the United States, and there has since been speculation that it planned a big American acquisition.

After rising Friday on takeover speculation, Republic shares fell $1.9375, to $68.0625, in New York today. Safra Republic shares, traded in Luxembourg, soared 17.5 euros to close at 66 euros. Both HSBC Holdings and HSBC's separate class A shares fell more than 2 percent here.

By purchasing Safra Republic Holdings, HSBC will acquire 30,000 international clients in high-margin private banking, a business that generally caters to people with $1 million and more to invest. The affiliate has 44 offices holding client funds that total $56.5 billion.

''What they want to capture is an ever-growing number of millionaires in Asia and, to some extent, in Latin America,'' said Simon Samuels, a banking analyst with Salomon Smith Barney here. Wealth management, he said, was also seen as ''the flavor of the next century'' on the assumption that with governments less able to provide pensions, there would be a corresponding boom in private investment by individuals.

John Bond, HSBC's chairman, said: ''The acquisitions we have announced today will bring together two complementary private banking franchises. At the stroke of a pen, it doubles the size of our consumer-banking operations in the United States, and it doubles the size of our private-banking business around the world.''

http://www.nytimes.com/1999/05/11/business/hsbc-to-pay-10.3-billion-for-republic.html

As of December 31, 1999, Republic New York Corporation was acquired by HSBC USA Inc. Previously, Republic New York Corporation operated as the holding company of Republic National Bank of New York. The company, through its subsidiaries, provided various banking and financial services worldwide to corporations, financial institutions, governmental units, and individuals. Republic New York Corporation is based in New York, New York.
452 Fifth Avenue
New York, NY 10018
United States
Phone:
212-525-6100
Key Executives For Republic New York Corporation
Republic New York Corporation does not have any Key Executives recorded.
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=299877

HSBC's history
Establishment and early years
HSBC is named after its founding member, The Hongkong and Shanghai Banking Corporation Limited, which was established in 1865 to finance the growing trade between Europe, India and China.

The inspiration behind the founding of the bank was Thomas Sutherland, a Scot who was then working for the Peninsular and Oriental Steam Navigation Company. He realised that there was considerable demand for local banking facilities in Hong Kong and on the China coast, and he helped to establish the bank which opened in Hong Kong in March 1865 and in Shanghai a month later.

Soon after its formation, the bank began opening branches to expand the services it could offer customers. Although that network reached as far as Europe and North America, the emphasis was on building up representation in China and the rest of the Asia-Pacific region. HSBC was a pioneer of modern banking practices in a number of countries – for instance, in 1888 it was the first bank to be established in Thailand, where it printed the country's first banknotes.

From the outset trade finance was a strong feature of the local and international business of the bank, an expertise that has been recognised throughout its history. Bullion, exchange, merchant banking and note issuing also played an important part. In 1874, the bank handled China's first public loan and thereafter issued most of China's public loans.

By the end of the century, after a strong period of growth and success under the leadership of Thomas Jackson (chief manager for most of that period from 1876 to 1902), the bank was the foremost financial institution in Asia.

Challenges and change

The 20th century saw challenges and change for HSBC. In the early years of the 20th century, HSBC widened the scope of its activities in the East. It became increasingly involved in the issuing of loans to national governments, especially in China, to finance modernisation and internal infrastructure projects such as railway building. The First World War brought disruption and dislocation to many businesses, but the 1920s saw a return to prosperity in the East as new industries were developed and trade in commodities such as rubber and tin soared. The bank's new head office in Hong Kong (1935) and the new buildings at major branches such as Bangkok (1921), Manila (1922) and Shanghai (1923) reflected this confidence.

The 1930s ushered in an era of uncertainty with economic recession and political turmoil in many of the bank's markets. In the Second World War, the majority of the bank's staff in the East became prisoners of war as the enemy advanced through Asia. The bank survived under the new leadership of Arthur Morse, and through its prudent policy of building up large reserves in peace time. At the end of the war, HSBC took on a key role in the reconstruction of the Hong Kong economy. Its support for the skills of newcomers to Hong Kong was especially vital to the upsurge in manufacturing in this period.

In other markets, however, HSBC needed to make major readjustments. Most of the mainland offices in China were closed between 1949 and 1955, leaving only the Shanghai office to continue its long and eventful service. These changes carried the risk that the bank was over-concentrating its interests in Hong Kong. The bank addressed this concern by diversifying through a series of alliances and acquisitions. The purchases of the Mercantile Bank and the British Bank of the Middle East in 1959 took HSBC into new pastures, and the formation of a merchant banking arm in 1972 extended its range of services. By the 1970s the bank had firmly developed a policy of expansion by acquisition or formation of subsidiaries with their own identities and expertise.

Making of the modern HSBC

In the later years of the 20th century HSBC moved from an important regional bank to one of the world's leading financial services organisations. This transition was achieved by a number of steps.

By the late 1970s HSBC's management had conceived the strategy of the 'three-legged stool' with the legs of the stool representing the three markets of the Asia-Pacific region, the USA and the UK. In the 1980s, the purchase of Marine Midland Bank in the USA represented the acquisition of the second leg of the stool. HSBC then sought a similar purchase in the UK. The initial target was the Royal Bank of Scotland but after this acquisition failed, attention turned to Midland Bank and a 14.9 per cent stake was taken in 1987. After creating a new holding company, HSBC Holdings plc in 1991, HSBC then made a recommended offer for full ownership of Midland in July 1992. The third leg was in place. As a result of the formation of the new holding company and the acquisition of Midland Bank, HSBC became headquartered in London.

HSBC continued to grow through a number of acquisitions across the globe. In November 1998, HSBC announced the adoption of a unified brand, using HSBC and the hexagon symbol everywhere it operated, with the aim of enhancing recognition of HSBC by customers, shareholders and staff throughout the world.

In the 21st century, HSBC has renewed its focus on its birthplace, growing its business in China both organically and through a series of strategic partnerships. HSBC's diversification and its core values of financial strength and stability have stood it in good stead in the recent global turbulence in economies and markets, and it remains well placed to deal with an uncertain world

http://www.hsbc.com/about-hsbc/company-history/hsbc-history

HSBC Holdings plc - Company Profile, Information, Business Description, History, Background Information on HSBC Holdings plc



8 Canada Square
London
E14 SHQ
United Kingdom
Company Perspectives

We believe long-term success and good corporate behaviour are linked. Corporate Social Responsibility has been a vital ingredient in HSBC's 140 years of success. We have always maintained that a company's first social responsibility is to be successful. Success allows us to invest in new products and services for our customers. It enables us to pay the dividends which form an important part of the long-term savings and pension plans of our shareholders. It allows us to contribute to public services through the taxes we pay to governments. It creates jobs for our colleagues and suppliers.

History of HSBC Holdings plc



A leading international banking group, HSBC Holdings plc (also referred to as the HSBC Group) operates in about 80 countries and offers comprehensive financial services encompassing not only commercial and merchant banking but also capital markets, consumer finance, securities, investments, and insurance. The HSBC Group is increasingly international in nature, despite the group still being centered around the bank from which it evolved (and from which it gained its acronymic name)--The Hongkong and Shanghai Banking Corporation Ltd., the top bank in Hong Kong, known colloquially as HongkongBank.

HSBC has 9,500 offices spread out across five continents serving 120 million customers. While a growing force in many areas of the world, the group is especially notable for its longstanding presence in China, where it has been active since 1865. Its foreign subsidiaries are among the leading banks in Canada, France, Mexico, and other countries.

Founding of HongkongBank

The history of HSBC begins with the founding of the Hongkong and Shanghai Banking Company, Ltd. in 1865. In the early 1860s, Hong Kong's financial needs were served by European trading houses called "hongs." This system proved increasingly inadequate as the colony's bustling trade--primarily in tea, silk, and opium--burgeoned. By 1864 the first proper banks had been established, but as these were based in London or India and controlled from abroad, there was a growing feeling that a local bank was needed in the colony.

Dissatisfaction led to action when it was discovered that a group of Bombay financiers intended to set up a "Bank of China" in Hong Kong, and that this bank, chartered in London, was to offer only a small proportion of its shares to China coast businesses. Thomas Sutherland, the Hong Kong Superintendent of the Peninsula and Orient Steam Navigation Company, proposed the foundation of a new bank modeled on "sound Scottish banking principles." The proposal was promptly taken up by others of the Hong Kong business community; within days a provisional committee had established a banking cooperative capitalized at HKD 5 million. The move effectively preempted the proposed "Bank of China," whose representative, when he arrived later in Hong Kong, could find no market for his shares.

The Hongkong and Shanghai Banking Company Ltd. opened on March 3, 1865, with a second branch inaugurated in Shanghai on April 3. A London office was opened later in the year. Members of the cooperative included American, German, Scandinavian, and Parsee Indian merchant houses, as well as representatives from the Bombay-based David Sassoon & Company and Hong Kong-based Dent & Company. The largest companies in Hong Kong, Jardine Matheson and the American firm Russell & Company, were not represented. The highly favorable response to the bank by foreign interests and compradores (native businessmen who acted as intermediaries with the Chinese community), however, led both to reconsider and join.

An international financial crisis in 1865-66 could have destroyed the bank. Instead, with financial support from its members, the bank took over the operations of failed competitors and hired their staff. Dent, meanwhile, the dominant Hong Kong member of the group, went bankrupt. Instead of hurting the cooperative, however, Dent's failure allowed broader representation by more diverse local interests.

Initially, the bank was established under the local Companies Ordinance as the Hongkong and Shanghai Banking Company Ltd. Under the colonial law of the time, a bank had to incorporate either under a royal charter in compliance with the Colonial Banking Regulations or else according to British banking legislation. The bank's founders objected to these options, however, as they had particularly designed their enterprise as a local concern. Eventually a deal was struck with the Treasury whereby the bank (renamed The Hongkong and Shanghai Banking Corporation), under a unique ordinance, could retain Hong Kong headquarters while complying with the Colonial Banking Regulations.

Expanding Rapidly in the Late 19th Century

HongkongBank expanded rapidly throughout the 19th century. By 1900, it had branches in Japan, Thailand, the Philippines, Singapore, and the countries now known as Malaysia, Myanmar, Sri Lanka, and Vietnam. In some Asian cities, HongkongBank was the first to usher in principles of modern Western banking and was indeed Thailand's very first bank, printing that country's first bank notes. In the United States and Europe, HongkongBank branches opened in San Francisco in 1875, New York in 1880, Lyons in 1881, and Hamburg in 1889. Except in New York, where a Canadian bank already operated, HongkongBank was the first foreign bank in each of these cities.

In Hong Kong, operations experienced a setback in the 1870s when the bank made some unwise investments in local Hong Kong industry--its reserves fell from HKD 1 million to HKD 100,000--but the company soon regained its footing under the leadership of a new chief manager, Thomas Jackson, who brought the bank back to a renewed emphasis on its field of expertise, trade finance. By the end of Jackson's reign, in 1902, HongkongBank's paid-up capital stood at HKD 10 million, and its published reserves at HKD 14.25 million, with additional estimated inner reserves of HKD 10 million.

The bank had, however, developed another lucrative role--that of banker to governments. By the 1880s, HongkongBank was operating in this capacity to the government of Hong Kong and had acquired the Treasury Chest (the British government's military and foreign service) business for China and Japan. In addition, the HongkongBank issued bank notes for Hong Kong and for the Straits Settlements (Singapore and Penang). Since these notes were not, at the time, legal tender, their popularity reflected the public's trust in HongkongBank. Through a powerful compradore in China, the bank established contacts with local officials in Tianjin and Beijing. The bank was later asked to issue a public loan on behalf of the Chinese government, and directed several more in ensuing years. While some of these loans financed China's war against Japan (1894-95) and the enforcement of peace during internal conflicts such as the Boxer Rebellion in 1900, the bulk was used for infrastructural projects such as railroads, coal mines, and shipping lines.

The bank was able to develop a very favorable rapport with the government and business interests in China mainly because it had a widespread presence in China and was incorporated in Hong Kong. By 1910 it was the favored intermediary of the multinational China Consortium, a result of the demonstrated effectiveness of the Bank's London manager, Sir Charles Addis.

World Wars Leading to Numerous Difficulties

World War I deeply divided the bank, still well represented by both Germans and Britons. The German members of its board, identified in the press as "hostile interests," eventually resigned, marking a more or less permanent end to German participation in the company. Still, the bank's Hamburg office remained open for the duration of the war.

The high price of silver after the war led the bank to make a rights issue to finance an expansion. Chief Manager A.G. Stephen presided over the construction of new facilities in Hankow, Bangkok, Manila, and especially Shanghai, where a new office was opened in 1923. An office opened in Vladivostok in 1918 but was forced to close in 1924, when Russian revolutionary forces completed their consolidation of control over Siberia.

The optimism of the early 1920s crashed after 1929 and continued to deteriorate through the 1930s, as Japanese interests moved into China, this time supported by Japanese guns. At first, the Japanese domination of China was limited to the rich hinterlands of Manchuria and consisted mainly of the commercial exploitation of resources. While the bank was permitted to establish offices in the Manchurian cities of Dairen, Mukden, and Harbin, its operations were limited only to foreign trade. Meanwhile, in the rest of China, the bank experienced new competition from an increasingly sophisticated Chinese banking community.

At the same time, the bank was losing business from the Philippine government and was discriminated against in Indonesia and Vietnam by Dutch and French colonial authorities. Despite generous lending and other support tactics for customers involved in rubber and other volatile commodities trades, bank profits continued to deteriorate. In many cases, competitors complained that the bank's extraordinary care "exceeded the limits of prudent lending." The bank was, however, founded on cooperative precepts, and continued to operate on that basis. Still, it was the shareholders who suffered; shareholders' funds fell from £9.1 million in 1918 to £8.6 million in 1940.

The number of Hong Kong dollars in circulation, 80 percent of which was printed by the Hongkong and Shanghai Bank, increased from HKD 50 million in 1927 to HKD 200 million in 1940. In effect, the bank backed HKD 160 million of the colony's currency--a dangerous exposure to the local economy, despite transferring the currency from a silver to sterling standard. The bank became involved in an even more unmanageable currency-stabilization effort in Shanghai, from which it eventually had to bow out, turning the scheme over to a government board.

The Japanese occupation of China, meanwhile, had become extremely brutal. Terror bombings, invasion, and a Japanese military riot in Nanking stifled commerce in China and isolated Hong Kong from its Chinese hinterland. Sensing imminent danger, the bank's chief manager, Vandeleur Grayburn, authorized the immediate transfer of silver reserves into sterling assets in London. On December 8, 1940, shortly after completing the transfer, Japanese troops stormed through Hong Kong's New Territories, and on December 25 won a surrender.

Bank employees in Manchuria, Japan, and Indochina were repatriated, and those in Burma and Singapore escaped to India. Employees in China, particularly Foochow, managed to reach Chungking, where the bank opened a formal office in 1943. The staff in Hong Kong was much less fortunate; most of them who were of European descent were imprisoned.

Under prearranged orders from Grayburn, the bank's London manager, Arthur Morse, assumed managerial control of the bank. Morse transferred the dollar-denominated assets located in Hong Kong to London, fearing that if the Japanese gained control of them, the assets would be frozen by the U.S. government. In light of the circumstances--the bank's board was interned in Hong Kong--Morse was named both chief manager and chairman. During the occupation, Japanese authorities forced the bank to issue additional currency in order to support the local economy. Grayburn and his designated successor, D.C. Edmonston, meanwhile, died in prison.

The war ended so suddenly in August 1945 that Hong Kong remained occupied when Japan surrendered. With colonial authorities back in control, the bank began the difficult and costly task of rebuilding. The amortization of bank notes issued under the occupation cost HKD 16 million, and new legislation only permitted the bank to collect debts from enemy interests in depreciated occupation currencies.



Postwar Recovery and Expansion

Despite its weakened condition, the bank played a major role in the reconstruction of Hong Kong, a task Morse began planning well before the war ended. All the company's branches were reopened--with the exception of Hamburg which, again, had remained open during the war--including those in Japan. By 1947, however, new problems arose in China, where the wartime alliance between Chiang Kai-shek's nationalists and Mao Tse-tung's communists had degenerated into a civil war. The immediate effects were severe inflation and increasing public disorder.

By October 1949 the communists had gained control of the mainland and the nationalists had fled to Taiwan. When an initial plea by the communists for reconstruction in cooperation with capitalists was suddenly reversed in 1950, industrialists fled China--especially Shanghai--for Hong Kong. The bank maintained offices in Shanghai, Beijing, Tianjin, and Shantou until 1955, when all but the Shanghai branch were closed. The Chinese, it seemed, preferred to do all their business through Hong Kong.

After the war, the British government practiced a "non-extractive" economic policy in Hong Kong, which, coupled with the entrepreneurial talent of industrialists transplanted from Shanghai and a labor force swelled by thousands of mainland refugees, created a powerful economic base.

The bank financed hundreds of new ventures that helped the colony achieve unprecedented export-led growth. The growth of the textile industry in Hong Kong, however, led the bank to fear that it had become overexposed to that one industry.

Under Michael Turner, the HongkongBank adopted a new strategy of expansion using subsidiaries during the mid-1950s.

 Initially made necessary by American banking legislation, the subsidiary form of organization was first used in 1955 to establish a branch in California--one step toward reducing its dependence on Hong Kong.

Because Britain relinquished much of its empire after the war, British companies were forced to rationalize, by merger, acquisition, or nationalization.

Indeed, many went bankrupt.

Two such companies, the Mercantile Bank (formerly the Chartered Mercantile Bank of India, London, and China) and the British Bank of the Middle East (known as BBME, formerly the Imperial Bank of Persia), were purchased by the Hongkong and Shanghai Bank in 1959.

The addition of the Mercantile Bank, with an extensive branch network in India, and the BBME, strongly represented in the Persian Gulf, made the HongkongBank the largest foreign bank in most of the countries from the Far East to southwest Asia.

Having reduced its exposure to Hong Kong, the bank moved next to diversify operationally.

 In 1960 it created Wayfoong, a consumer financing group whose name translates loosely as "focus of wealth."

A banking crisis in Hong Kong in 1964 led to a serious run on a competitor, the Hang Seng Bank.

 As the primary financial institution in Hong Kong and de facto central bank, the HongkongBank, while under no statutory duty to do so, acquired a majority interest in Hang Seng in 1965.

Hang Seng subsequently recovered, and was the second largest bank incorporated in Hong Kong into the 1990s.

The HongkongBank's expansion through subsidiaries began in earnest with the creation in 1972 of Wardley Ltd., a merchant bank, and an insurance company called Carlingford.

The bank also made numerous other investments--in Cathay Pacific Airways, the World-Wide shipping group, and the South China Morning Post.

All these investments proved highly profitable in light of Hong Kong's rapid economic growth.

In addition, the BBME benefited greatly from the newly prosperous oil-based economies in the Persian Gulf.

In 1978, however, BBME branches in Saudi Arabia were taken over by the Saudi British Bank, a Saudi-controlled bank in which BBME retained management control, but only 40 percent ownership.

Under the leadership of Michael Sandberg, the HongkongBank reexamined its position in America as part of a wider strategy to gain greater representation in the major Western economies.

 The Hongkong and Shanghai Bank of California was sold and the bank purchased a 51 percent share of Marine Midland Bank, a Buffalo, New York-based bank holding company, in 1980.

 The HongkongBank bought the outstanding shares of Marine Midland in 1987.

This acquisition inspired substantial debate in the U.S. Congress about whether banking laws should be strengthened to prevent foreign companies from gaining control over American banks.

The bank expanded in several ways during 1980.

In China, the Shanghai branch was expanded and a representative office was established in Beijing.

In addition, the BBME relocated from London to Hong Kong, and the bank gained control of Concord International, a leasing and finance group, and Anthony Gibbs, a British merchant bank.

The following year, a Canadian subsidiary, the Hongkong Bank of Canada, was established in Vancouver.

 In 1986 the Hongkong Bank of Canada acquired the business of the Bank of British Columbia, bringing the number of branches across Canada to 61.

A bidding war over the Royal Bank of Scotland Group between the HongkongBank and Standard & Chartered (issuer of Hong Kong's other currency) was halted in 1981 by the British Monopolies & Mergers Commission, which ruled against both bids.

 Meanwhile, the bank succeeded in establishing a presence in Africa in 1981 through the acquisition of a controlling interest in Equator Bank by its merchant bank subsidiary Wardley;

 in Cyprus in 1982, also primarily through Wardley;

and in Australia in 1985, when it established HongkongBank of Australia.

Back in North America, HongkongBank entered into a strategic alliance with California-based Wells Fargo Bank in 1989.

Also that year, HongkongBank was registered under the Hong Kong Companies Ordinance, at which time it adopted the name The Hongkong and Shanghai Banking Corporation Ltd.

HongkongBank's expansionist policies were not always successful. Its acquisition of Marine Midland, said initially to have boosted the bank's assets from HKD 125.3 billion to HKD 243 billion, soon proved a debacle.

Ill-advised forays into real estate and Latin American lending led to significant losses, prompting the parent company in 1991 to completely overhaul its subsidiary--at a purported cost of $1.8 billion.

Other high-profile failures of the 1980s included the bank's financing of an Australian tycoon, Alan Bond, who went bankrupt.

Forming HSBC Holdings plc in 1991

In 1984 Great Britain and the People's Republic of China signed a historic agreement, slating for July 1, 1997, the return of Hong Kong to Chinese control, and providing added impetus to HongkongBank's overseas expansion.

Keen to beef up its presence in Europe, the bank acquired James Capel, a leading U.K. securities firm, in 1986.

Of still greater importance was the beginning in December 1987 of an association between HongkongBank and Midland Bank, one of four major British clearing banks.

In December 1987 HongkongBank made the friendly acquisition of 14.9 percent of Midland's stock, agreeing not to increase its stake in Midland until the expiration of a three-year agreement in December 1990.

Staking its future in Europe to that of Midland, HongkongBank transferred control of its branches on the European continent to Midland and in turn acquired Midland's branches in Canada and South Korea.

In 1990 Hongkong Bank of Canada expanded still further through the purchase of Lloyds Bank Canada, becoming the seventh largest bank in Canada by the early 1990s.

HongkongBank and Midland entered into merger talks in 1990, but the talks broke off late in the year because of what were termed "financial difficulties." Nevertheless, HongkongBank held onto its stake in Midland following the expiration of the three-year agreement.

Like many Hong Kong-based companies facing the uncertainties of 1997, HongkongBank made some major organizational changes well before the handover.

In 1991 it created a new holding company, HSBC Holdings plc, making HongkongBank a subsidiary of the U.K.-incorporated but Hong Kong-based HSBC Holdings.

HSBC stock was set up on both the London and Hong Kong markets, showing the importance HongkongBank placed on Europe (and London) for its future.

For HongkongBank, the establishment of a new holding company relieved it of management responsibility for the group's more than 500 subsidiaries in 50 countries. The bank thus could focus primarily on the Asia-Pacific region it knew so well.

HSBC completed the long-anticipated takeover of Midland in 1992, gaining full control of what became its flagship in Europe.

HSBC made an initial friendly offer in March for Midland. The following month Lloyds stepped in with a larger, hostile offer. HSBC soon put an end to the takeover battle with a 480p per share offer in June, prompting Lloyds to bow out.

HSBC ended up paying £3.9 billion ($7.2 billion) to acquire Midland.

As a condition of the acquisition, HSBC was required by the regulatory Bank of England to move its main office to London, which it did in January 1993.

 The headquarters of HongkongBank remained in Hong Kong.

The acquisition of Midland was a coup, providing HSBC with the significant presence in Europe it had previously lacked.

Variously described as a merger and a takeover, the amalgamation virtually doubled HSBC's assets (from £86 billion to £170 billion) and workforce. The venerable Midland, the U.K.'s third largest bank, was not performing to standard at that time, being the least profitable of Britain's "big four" banks. Nevertheless, the financial health and the international experience of the parent company began attracting larger corporate customers to Midland.

In addition, many individuals were subsequently won over by the telephone banking service, First Direct, introduced by Midland in 1989 and strongly backed by HSBC. HSBC's lead in technology--used, for example, to automate credit decisions and limit staff expenditure--also played a part in Midland's recovery.

Although under the HSBC umbrella structure individual subsidiaries acted, in large part, autonomously, the company also moved to coordinate some operations.

Soon after the takeover of Midland, HSBC integrated its treasury operations in London, New York, and Tokyo and established common technological standards.

Also in 1992 HSBC opened a trading room in London for the dealing business of Midland, James Capel, and HSBC Greenwell.

This became the largest treasury trading operation in Europe.

That year also saw the establishment of the HSBC Investment Banking Group, which coordinated the merchant banking, securities, and asset management business (HSBC Asset Management) of the entire HSBC Group.

HongkongBank, which had long acted as a quasi-central bank, was relieved of some of these unofficial duties in 1992, when the Hong Kong Monetary Authority was established.

The following year HongkongBank divested its holding in Cathay Pacific Airways.

In 1994 it became the first foreign bank to incorporate locally in Malaysia through the establishment of Hongkong Bank Malaysia Berhad.

 In the mid-1990s the bank greatly expanded its personal banking business through the opening or upgrading of personal banking units in Australia, Bangladesh, Brunei, Hong Kong, Indonesia, Mauritius, New Zealand, the Philippines, Saipan, Singapore, Sri Lanka, Taiwan, and Thailand.

The bank also expanded its presence in China during this period, maintaining good relations with the Chinese government--which was extremely important as 1997 approached.

HSBC Holdings continued to expand in the mid-1990s under the leadership of Chief Executive John Bond.

In 1995 HSBC and Wells Fargo established Wells Fargo HSBC Trade Bank in California, a joint venture (40 percent owned by HSBC) providing trade finance and international banking services in the United States.

 Marine Midland was bolstered in 1996 with the acquisition of Rochester, New York-based First Federal Savings and Loan Association for $620 million.

 Latin America was the subject of several 1997 transactions:

the purchase of a 10 percent stake in Banco del Sur del Peru; the founding of a new subsidiary in Brazil, Banco HSBC Bamerindus S.A., which took over assets of Banco Bamerindus do Brasil;

the increase in investment in Banco Santiago in Chile to 6.99 percent;

the acquisition of Roberts S.A. de Inversiones of Argentina (renamed HSBC Roberts S.A. de Inversiones);

 and the purchase of a 19.9 percent stake in Grupo Financiero Serfin of Mexico.

Although HSBC seemed to suffer no ill effects from the handover of Hong Kong to Chinese control on July 1, 1997, it did feel the effects of the Asian economic crisis of the late 1990s.

The group was particularly hard hit in troubled Indonesia, where it had to set aside about $2.5 billion in provisions for bad loans.

 Nevertheless, its earlier moves into Europe and the Americas paid off handsomely, as higher profits in these regions helped offset weaker results in Asia.

Meantime, the Hong Kong Monetary Authority, in an attempt to thwart currency speculators, made a significant intervention in the Hong Kong Stock Market in August 1998, purchasing large stakes in several prominent companies.

The government of Hong Kong thereby became HSBC Holdings' single largest shareholder, with an 8.9 percent stake.

 In October 1998 HSBC announced that it had signed a 999-year lease for a new 1.1 million-square-foot headquarters building at Canary Wharf in London, scheduled for completion by early 2002.

 The following month HSBC said that it would unify the HSBC Group under the HSBC name and logo, thereby establishing a more global corporate identity.

Among the units whose marketing names would change to HSBC were Banco HSBC Bamerindus, the British Bank of the Middle East, Hongkong Bank Malaysia, Hongkong Bank of Australia, Hongkong Bank of Canada, HSBC Banco Roberts, Marine Midland, Midland Bank, HSBC Equator Bank, HSBC Investment Banking, and even the flagship HongkongBank itself. Eventually the legal names of many HSBC Group subsidiaries would also be changed. In a press release, Bond said: "We want the HSBC brand to be known in every country and in every sector in which we operate as synonymous with integrity, trust, and excellent customer service. I am confident that a unified brand and the strong recognition it will bring for HSBC's exceptional strengths is an important step forward as we work to maximise shareholder value." The implementation of this significant change was sure to require much of HSBC's attention at the onset of the 21st century.

HSBC shares began trading on the New York Stock Exchange in 1999.

 Later in the year, the group bought Republic New York Corporation and Safra Republic Holdings S.A. Acquisitions also were giving HSBC a considerable presence in Europe.

The company bought Crédit Commercial de France (renamed CCF S.A. and ultimately HSBC France) for $11 billion in 2000.

 CCF had been formed in 1894 and operated 650 branch offices. In July 2000, when the deal closed, HSBC shares began trading on the Paris Stock Exchange.

HSBC bought out Australia's NRMA Building Society Ltd., Turkey's Demirbank, and Taiwan's China Securities Investment Trust Corporation in 2001.

It also was picking up minority shares in others such as the Bank of Shanghai and Ping An Insurance Company, China's second largest insurance provider.

Ping An underwent an initial public offering in 2004, diluting HSBC's stake to about 10 percent, but in August 2005 raised its holding to 19.9 percent at a cost of $1 billion.

"The World's Local Bank" in 2002

The company spent about $2 billion in 2002 to buy and recapitalize Mexico's Grupo Financiero Bital. HSBC gained 5.5 million new customers at 1,400 new branches. During the year, HSBC began billing itself as "The world's local bank." HSBC opened its impressive new headquarters at London's Canary Wharf in April 2003. About 8,000 employees were based there.

Part of HSBC's sensitivity to local cultures included support of environmental causes such as the World Wildlife Fund.

In December 2004, the company became the first bank to set the goal of becoming "carbon neutral," a status it achieved within a year.

In 2003, the group made a major acquisition in the United States, taking over Household International Inc., which had more than 1,300 branches and 53 million consumer finance and credit card customers.

In Brazil, HSBC also bought a leading consumer finance company, Losango Promotora de Vendas Limitada, as well as Banco Lloyds TSB S.A.-Banco Múltiplo.

Among other 2003 deals was the purchase of Keppel Insurance Pte Ltd., which supplied insurance in Singapore.

The mergers and acquisitions activity continued in 2004, adding the Bank of Bermuda Ltd. and Marks and Spencer's Retail Financial Services Holdings Ltd. (d/b/a M&S Money).

By this time, most of the group's existing subsidiaries had changed their names to include the HSBC initials.

Household International, renamed HSBC Finance Corporation, and others were combined into the HSBC North America unit.

China was the hub of much of the group's investment activity in 2005.

While raising its holding in Ping An Insurance, it also bought a 19.9 percent stake in Bank of Communications Ltd. HSBC was also opening new bank branches.

In March 2005, its Beijing branch began providing local currency services, a first for a foreign bank. Elsewhere in the world, U.S. credit card issuer Metris Companies Inc. was acquired by HSBC Finance for $1.6 billion in December 2005.

The group's chairman since 1988, Sir John Bond, was retiring in May 2006. He was leaving a much larger company than the one he had joined. HSBC posted pretax profits of $21 billion in 2005, up 11 percent from the previous year. Total assets were $1.5 trillion (£873 billion; HKD 11.65 trillion). The group employed a virtual army of 265,285 employees worldwide, serving nearly 100 million customers.

Principal Subsidiaries

The Bank of Bermuda Ltd.;

Hang Seng Bank Ltd. (Hong Kong; 62.14%);

HFC Bank Ltd.;

HSBC Asset Finance (UK) Ltd.;

The Hongkong and Shanghai Banking Corporation Ltd. (Hong Kong);

HSBC Bank A.S. (Turkey);

 HSBC Bank Argentina S.A. (99.99%);

HSBC Bank Australia Ltd.;

HSBC Bank Brasil S.A. - Banco Múltiplo;

HSBC Bank Canada;

HSBC Bank Egypt S.A.E. (94.53%);

HSBC Bank Malaysia Berhad;

HSBC Bank Malta plc (70.03%);

HSBC Bank Middle East Ltd. (Jersey);

HSBC Bank plc;

HSBC Bank USA, N.A.;

HSBC La Buenos Aires Seguros S.A. (Argentina; 99.53%);

 HSBC Finance Corporation (United States);

HSBC France (formerly CCF S.A.) (99.99%);

HSBC Guyerzeller Bank AG (Switzerland);

 HSBC Insurance (Asia) Ltd. (Hong Kong);

HSBC Insurance Brokers Ltd.;

HSBC Investments (Taiwan) Ltd. (formerly HSBC Asset Management (Taiwan) Ltd.);

HSBC Investments (UK) Ltd. (formerly HSBC Asset Management (Europe) Ltd.);

HSBC Life (International) Ltd. (Bermuda);

HSBC Life (UK) Ltd.;

 HSBC Private Bank (Guernsey) Ltd. (Guernsey);

 HSBC Mexico S.A. (99.74%);

 HSBC Private Bank (Suisse) S.A.;

HSBC Private Bank (UK) Ltd.;

HSBC Securities (USA) Inc.;

HSBC Seguros (Brasil) S.A. (97.92%);

HSBC Technology & Services (USA) Inc.;

HSBC Trinkaus & Burkhardt KGaA (Germany; 77.89%);

Maxima S.A. AFJP (Argentina; 59.99%).

Principal Divisions

Europe;

Hong Kong;

Rest of Asia-Pacific, including the Middle East and Africa;

North America;

South America.

Principal Operating Units

Grupo Financiero HSBC, S.A. de C.V. (99.8%); HSBC Bank plc;

HSBC France (Netherlands);

 HSBC Insurance Holdings Ltd.;

HSBC Investment Bank Holdings plc;

HSBC Latin America Holdings (UK) Ltd.;

HSBC North America Holdings Inc.

Principal Competitors

Lloyds TSB Group plc;

Barclays plc.

Chronology

Key Dates
1865 Hongkong and Shanghai Banking Company, Ltd. is established.
1918 Shareholders' funds are £9.1 million.
1940 The Japanese occupy Hong Kong during World War II.
1950 Mainland industrialists flee the communists to Hong Kong.
1959 HSBC buys London's Mercantile Bank and the British Bank of the Middle East.
1960 The bank forms the Wayfoong consumer financing group.
1972 Merchant bank subsidiary Wardley Ltd. is established.
1980 The California subsidiary is divested; HSBC acquires control of Buffalo, New York's Marine Midland Bank.
1991 Holding company HSBC Holdings plc is formed.
1992 Midland Bank, the United Kingdom's third largest, is acquired for £3.9 billion ($7.2 billion).
1997 The United Kingdom transfers control of Hong Kong to the People's Republic of China.
2000 HSBC acquires venerable Crédit Commercial de France (CCF) for $11 billion.
2002 Mexico's Grupo Financiero Bital is acquired and recapitalized for $2 billion.
2003 A new headquarters is opened; Household International of the United States is acquired.
2004 HSBC acquires Bank of Bermuda and Marks & Spencer's retail financial services unit.
2005 Total assets are $1.5 trillion.
Additional Details

Public Company
Incorporated: 1865 as Hongkong and Shanghai Banking Company, Ltd.
Employees: 265,285
Total Assets: $1.50 trillion (2005)
Stock Exchanges: London Hong Kong New York Paris Bermuda
Ticker Symbols: HSBA; 005; HBC; PHSB
NAIC: 522110 Commercial Banking; 522120 Savings Institutions; 522292 Real Estate Credit; 522293 International Trade Financing; 523110 Investment Banking and Securities Dealing; 523920 Portfolio Management; 523930 Investment Advice; 523991 Trust, Fiduciary, and Custody Activities; 524110 Direct Life, Health, and Medical Insurance Carriers; 551111 Offices of Bank Holding Companies
Further Reference

Blanden, Michael, "After the Dust of Battle," Banker, August 1992, p. 36.
Chambers, Gillian, Hang Seng: The Evergrowing Bank, Hong Kong: Hang Seng Bank, 1991.
Collis, Maurice, Wayfoong: The Hong Kong and Shanghai Banking Corporation, London: Faber and Faber, 1965.
"An Empire at Risk," Economist, September 7, 1996, pp. 71-72.
Engardio, Pete, "Global Banker," Business Week, May 24, 1993, pp. 42-46.
Engardio, Pete, and Paula Dwyer, "Hongkong & Shanghai vs. the World," Business Week, August 7, 1995, pp. 59-60.
"Far Eastern Promise and the Global Gamble," Investors' Chronicle, January 29, 1993.
Graham, George, "HSBC Reaps Fruits of Growth Strategy," Financial Times, February 24, 1998, p. 26.
"Greater Than the Sum of His Parts," Financial Times, March 1, 1994.
Green, William, "Bland--And Proud of It," Forbes, July 7, 1997, pp. 94-96, 98-99.
Holmes, A. R., and Edwin Green, Midland: 150 Years of Banking Business, London: Batsford, 1986.
"HongkongBank's Global Gamble," Economist, March 21, 1992, pp. 107-08.
"Hong Kong/China Boom Spawns a Global Banking Colossus," QL Stockmarket Letter, July 1, 1993.
"HSBC Maps Strategy for US Market," South China Morning Post, January 14, 1993.
Irvine, Steve, "The Culture That Powers Hongkong Bank," Euromoney, February 1997, pp. 44+.
Jones, Geoffrey, The History of the British Bank of the Middle East, 2 vols., Cambridge: Cambridge University Press, 1986-87.
King, Frank H. H., The History of the Hongkong and Shanghai Banking Corporation, 4 vols., Cambridge: Cambridge University Press, 1987-91.
------, The Hongkong Bank in the Period of Development and Nationalism, 1941-1984: From Regional Bank to Multinational Group, New York: Cambridge University Press, 1991.
King, Frank H. H., ed., Eastern Banking: Essays in the History of the Hongkong and Shanghai Banking Corporation, London: Athlone Press, 1983.
King, Frank H. H., Catherine E. King, and David J. S. King, The Hongkong Bank Between the Wars and the Bank Interned, 1919-1945: Return from Grandeur, New York: Cambridge University Press, 1988.
------, The Hongkong Bank in Late Imperial China, 1864-1902: On an Even Keel, New York: Cambridge University Press, 1987.
King, Frank H. H., David J. S. King, and Catherine E. King, The Hongkong Bank in the Period of Imperialism and War, 1895-1918: Wayfoong, the Focus of Wealth, New York: Cambridge University Press, 1988.
Leung, James, "HongkongBank Extends Personal Touch," Asian Business, February 1997, p. 22+.
"Loan Masters," Economist, August 28, 1993, pp. 65-66.
Lucas, Louise, "Hongkong Bank Chief to Quit in HSBC Rejig," Financial Times, October 16, 1998, p. 25.
------, "Profits Growth Limited at HongkongBank," Financial Times, August 5, 1997, p. 20.
Meyer, Richard, "Lessons from Buffalo," Financial World, July 23, 1991, pp. 37-39.
Morris, Kathleen, "Back to the Future," Financial World, June 20, 1995, pp. 42-44.
Muirhead, Stuart, Crisis Banking in the East: The History of the Chartered Mercantile Bank of India, London and China, 1853-93, Aldershot, England: Scolar Press, 1996.
Sender, Henny, and John McBeth, "Living Dangerously: Hongkong Bank Is Mired in an Indonesian Nightmare," Far Eastern Economic Review, February 29, 1996, pp. 52-53.
Silverman, Gary, "Look British, Think Chinese: Hongkong Bank Stays No. 1," Far Eastern Economic Review, December 28, 1995, pp. 64-65.
Tanzer, Andrew, "The Bank," Forbes, December 11, 1989, pp. 43-44.
Vander Weyer, Martin, "Hongkong Officer Corps Builds a Global Empire," Euromoney, April, 1993, pp. 52-56.
"Waiting for the Griffin to Pull Its Weight," Financial Times, March 16, 1993.
"You Organise Your Bank Around Your Customers," Daily Telegraph, March 22, 1993.
"Your Future Is Our Future," Hong Kong: The Hongkong and Shanghai Banking Corporation Ltd., 1997.

http://www.referenceforbusiness.com/history2/35/HSBC-Holdings-plc.html

Hongkong and Shanghai Banking Corporation Limite - Fgn Rep Off
03/07/1912 Licensed Hongkong and Shanghai Banking Corporation, The
11/30/1973 Agency To Branch
03/02/1984 Branch To Agency
09/24/1987 Agency To Branch
01/03/1990 Name Change To Hongkong and Shanghai Banking Corp, Limited, The
06/27/1990 Purchased Assets Global Union Bank
12/01/1999 Branch To Rep Off

Hongkong and Shanghai Banking Corporation, The - Fgn Rep Off
03/07/1912 Licensed Hongkong and Shanghai Banking Corporation, The
11/30/1973 Agency To Branch
03/02/1984 Branch To Agency
09/24/1987 Agency To Branch
01/03/1990 Name Change To Hongkong and Shanghai Banking Corp, Limited, The
06/27/1990 Purchased Assets Global Union Bank
12/01/1999 Branch To Rep Off

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