Now UBS, another multinational bank, is alleged to have manipulated LIBOR rates. The Guardian [20 December 2012] stated, "This week's details from regulators about just how flagrantly senior staff at the multinational bank went about fixing so-called Libor rates — the interest rates that determine everything from the cost of your mortgage to the monthly loan repayments made by businesses and local councils — make clear that the Libor scandal goes much further than a few rogue individuals or even a few rotten institutions." And that is the crux of the issue.
This does not come as a surprise to all those closely following the world of finance. An acclaimed activist against tax-havens and money laundering, Richard Murphy, claims that HSBC was "out of control during the period that the Reverend Lord Stephen Green was in charge." Incidentally, Stephen Green is Britain's Trade Minister and the former CEO of HSBC. But the issue is not merely a cozy link between politicians and big finance. Rather it is all about big finance fixing policies and politicians using big finance ruthlessly
That invariably brings us to India. It may not be out of place to mention two employees of HSBC, Herve Falciani and Georgina Mikhael, leaked secret data of 79,000 individuals and 20,000 companies of their accounts in Geneva, Switzerland. The list included persons of various nationalities. Subsequently, the French made this data available to governments across the world for possible pursuits of their tax cheats. It is widely believed that there are about seven hundred Indian names in that list.
According to revelations made by Arvind Kejriwal, a few weeks earlier, the IT department conducted searches in the premises of three such persons (one is not sure what happened to the balance). When confronted with evidences they admitted that they had bank accounts in HSBC abroad, which was not originally declared to the tax authorities. If documents released by Kejriwal are to be believed, all it requires is a phone call to HSBC who will depute their officers to open accounts in Zurich, collect cash (in INR), have it deposited abroad (in the currency of your choice), operate it under your instructions and then, should you require, pay you cash (in INR) as and when required in India. Hawala plain and simply
But that is not all. In 2004 when the United Progressive Alliance (UPA) government took office, a huge fall in the stock markets greeted it. In view of this crash, SEBI examined the role of certain market players. It was found by SEBI that an FII, UBS Securities Asia Limited, was one of the important players responsible for the said crash. During the course of the investigation, SEBI called for information relating to its major clients in terms of their addresses, the names of their directors, fund managers, major shareholders and top "five" investors who triggered that fall in the stock market. Strangely, UBS did not furnish the complete information citing client confidentiality. After a protracted legal battle SEBI settled for a fine of Rs 50 lakh after initially alleging Rs 50 cr of profit to the sellers. To this date one is not aware who triggered a fall in our markets on that eventful day.
Given these developments, regulators world over realize that crony capitalism is well past us. It is now the day of casino capitalism, where capital moves to shape, de-shape and reshape markets of all hues. Consequently, from US to UK to Jersey, these international banks are under merciless scrutiny by these regulators.
Despite this paradigm, it is indeed intriguing that the RBI or finance ministry has not yet commented on the allegations of Hawala transactions carried out through HSBC. In fact, such movement of capital allows players to rig stock markets, manipulate commodity markets and control the real estate markets. The real challenge is that our regulators, be it RBI, SEBI or Enforcement Directorate, are too innocent. Or are they're simply programmed to be credulous?