HSBC shareholders' concerns versus its social responsibility

The past 12 months have not been a very good year for Maltese banks. Malta's largest bank - Bank of Valletta - together with other banks, faced serious media scrutiny over their customer dealings over investment funds. 

It was only after a backlash from investors that Bank of Valletta responded partially to the demands of 'irate' investors who had lost their investment based on advice given to them by the Bank's stock broking front desk.

In late 90s, the former national bank (Mid-Med) was privatised and sold to HSBC. It was a profitable bank which offered a service and really and truly, there was no reason whatsoever to privatise it.

By purchasing Mid-Med, HSBC bought into an extensive client base, with sizeable savings.

The sale prompted a wave of criticism from those who feared that the sale was a sell out, and that we were selling our family silver for next to nothing. There was more than some truth in that accusation.

Today, the value of HSBC Malta is worth much more than Lm80 million - or €185 million.

The reaction to this negativism was met with a simple riposte: HSBC is high profile bank which adds value to the banking sector and financial markets.

One cannot say it did not. There were changes in banking culture which were positive and forward-looking.

In the first declarations, way back in the late 90s, HSBC committed itself to a corporate social responsibility. 

The latest news - that HSBC will be closing branches in a number of towns and villages and shedding employees - did not come as a complete surprise.

Yet the decision to close banks and shed employees eradicates any attempt by HSBC to pose as a bank with a corporate social responsibility. 

Indeed, when it talks of corporate social responsibility one can only view any measure as tokenism at its best, more so in the light of a bank that registered an €83 million profit and then goes about cutting down on its service and staff complement.

Banks, we are told, are there to make profits. So HSBC Malta camouflaged its downsizing as a move in line with the HSBC Group's drive to improve its organisational effectiveness.

By 15 February, HSBC will close down branches in Msida, Santa Venera, Naxxar and Attard. Branches in Manwel Dimech Street in Sliema and in Luqa will close down on 15 March. As of 15 February, the Gozo-based agencies in Nadur and Xaghra will also offer reduced service by appointment. The HSBC branch on Campus at University will also run on reduced service as of 30 June.

Now, the bank has of course been responding to the very fact that they feel that they have reached 'saturation' point in Malta, that their growth in this small market is stable but has little scope for growth.

HSBC is renowned for its aggressive approach to profits. In this respect, Bank of Valletta is closer and more respectful of the local culture. It is after all a people's bank and a Maltese bank. It should take advantage of this perception.

HSBC is not, and has a reputation of being less customer friendly. It has also shown, beyond any form of reproach, that it is more interested in wealthier clients. Indeed, many practices such as offering a regular cashier service which were essentially a service to ageing communities are shunned by many HSBC branches.

HSBC's decision comes in the wake of a year in which banks the world over have been criticised for their decisions, which have led to calamities that would have been unthinkable earlier.

All talk of treating banks with kid's gloves by government should really be reconsidered. In 1981, UK prime minister Margaret Thatcher imposed a windfall tax on High Street banks, irrespective of the contrary advice she was given. The Windfall Tax was a response to the Bank's significant profit in a recession dominated period.

The administration should stop worrying if banks will be negatively impressed and scared with a windfall tax announcement. Banks - most especially HSBC - will continue to act unilaterally irrespective of the economic realities, constraints or socio-economic impact of their actions.

They should be treated for what they are - business entities.