HSBC sets aside $2 billion to cover costs of US and UK regulatory fines

HSBC has set aside $2 billion to cover the costs of regulatory fines in the US and the UK over money laundering and mis-selling of payment protection insurance.

Europe's largest bank has set aside $700 million to cover the cost of US regulatory fines over insufficient money laundering controls, and $1.3 billion for mis-selling of payment protection insurance to consumers and interest rate hedging products to small businesses in the UK.

The London-based bank may have to set aside millions of dollars more if it is found guilty in private lawsuits filed in the US for manipulating the London interbank lending rate (Libor) and its euro counterpart Euribor.

''Regulatory and compliance events in the first six months of the year overshadowed financial performance,'' HSBC chairman Douglas Flint said in a statement today as the bank posted an 8.3 per cent drop in net income for the half year ended June.

''HSBC has made mistakes in the past, and for them I am very sorry,'' he added.

In a critical 330-page report, released early this month by the US Senate sub committee, the panel said that HSBC used its US bank as a gateway into the US financial system for some HSBC affiliates around the world to provide US dollar services to clients while playing fast and loose with US banking rules.