HSBC share price: US regulators reject lender’s ‘living will’

on Mar 24, 2015
Updated: Oct 21, 2019

HSBC Holdings Plc (LON:HSBA), Royal Bank of Scotland Group Plc (LON:RBS) and France’s BNP Paribas must rewrite their “living wills”, US regulators have told the banks. The Federal Reserve and Federal Deposit Insurance Corporation (FDIC) yesterday ordered the lenders to improve the planning in the event of their demise. They found that the existing plans contained “unrealistic or inadequately supported assumptions about the likely behavior of customers, counterparties, investors, central clearing facilities, and regulators; and inadequate analysis regarding interconnections within the firms”.

Living wills, introduced in the USin 2010, are intended to show how big banks can fail without threatening the broader financial system. Last year, the Fed and the FDIC, which share responsibility for the evaluation of the wills, rejected plans submitted by 11 banks, including JPMorgan Chase & Co, Goldman Sachs Group Inc, Barclays Plc (LON:BARC) and Deutsche Bank.
The regulators told HSBC, RBS andBNP Paribas to amend certain financial contracts, make sure their critical internal services can stay intact through a failure and show they can quickly produce reliable information in such an emergency. The three banks have until the end of the year to submit the improved plans.
In today’s trading, HSBC shares were down 0.2 percent at 577.42p, as of 09:57 UTC. The stock has fallen 5.3 percent since the start of the year. The company’s market capitalisation currently stands at £110.8 billion.
As of March 21, 2015, the consensus forecast amongst 33 polled investment analysts covering HSBC has it that investors should hold their position in the company. This consensus estimate has been maintained since November 26, 2014, when the sentiment of investment analysts deteriorated from “outperform”.
As of 13:03 GMT, Tuesday, 24 March, HSBC Holdings plc share price is 578.50p.

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