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
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
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.
SEC Revokes Registration of Republic New York Securities Corp., a
Broker-Dealer Pleading Guilty to Securities Fraud in Related
FOR IMMEDIATE RELEASE
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
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
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
For further information, please contact:
Wayne M. Carlin
Northeast Regional Office
Senior Trial Counsel
Northeast Regional Office
* Additional materials: Release No. 34-45157
Home | Previous Page
UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 45157 / December 17, 2001
File No. 3-10653
In the Matter of
REPUBLIC NEW YORK SECURITIES CORP.,
ORDER INSTITUTING PUBLIC ADMINISTRATIVE PROCEEDINGS PURSUANT TO
SECTION 15(b) OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING
FINDINGS, AND IMPOSING REMEDIAL SANCTION
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
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.
On the basis of this Order and the Offer submitted by Republic
Securities, the Commission finds that:1
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
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.
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
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
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
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.
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
ACCORDINGLY, IT IS ORDERED that Republic Securities' registration as
a broker or dealer be, and hereby is, revoked.
By the Commission.
Jonathan G. Katz
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.
Home | Previous Page
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
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
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
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
''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.''
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
Key Executives For Republic New York Corporation
Republic New York Corporation does not have any Key Executives
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
HSBC Holdings plc - Company Profile, Information, Business Description,
History, Background Information on HSBC Holdings plc
8 Canada Square
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
The following year HongkongBank divested its holding in Cathay Pacific
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
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
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
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
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
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
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
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)
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%).
Rest of Asia-Pacific, including the Middle East and Africa;
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.
Lloyds TSB Group plc;
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
2000 HSBC acquires venerable Crédit Commercial de France (CCF) for $11 billion.
2002 Mexico's Grupo Financiero Bital is acquired and recapitalized for $2
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
2005 Total assets are $1.5 trillion.
Incorporated: 1865 as Hongkong and Shanghai Banking Company, Ltd.
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
Blanden, Michael, "After the Dust of Battle," Banker, August 1992, p. 36.
Chambers, Gillian, Hang Seng: The Evergrowing Bank, Hong Kong: Hang Seng Bank,
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,
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,
Holmes, A. R., and Edwin Green, Midland: 150 Years of Banking Business, London:
"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.
Morris, Kathleen, "Back to the Future," Financial World, June 20, 1995, pp.
Muirhead, Stuart, Crisis Banking in the East: The History of the Chartered
Mercantile Bank of India, London and China, 1853-93, Aldershot, England: Scolar
Sender, Henny, and John McBeth, "Living Dangerously: Hongkong Bank Is Mired in
an Indonesian Nightmare," Far Eastern Economic Review, February 29, 1996, pp.
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.
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,
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,
06/27/1990 Purchased Assets Global Union Bank
12/01/1999 Branch To Rep Off