[LONDON] HSBC Holdings is not exposed to the collapse of scandal-hit auto-parts supplier First Brands Group, whose bankruptcy has left some of the biggest players on Wall Street facing hundreds of millions of US dollars in potential losses.
“We were not involved directly in First Brands and don’t know how much due diligence was done,” Michael Roberts, HSBC’s head of corporate and institutional banking, said in an interview with Bloomberg Television on Thursday (Oct 16).
Roberts warned that fraudsters were “getting better” and that the banking industry needed to up its game.
“You’re going to have to respond by being much better on due diligence,” said Roberts. Europe’s largest bank is in the process of rolling out across its divisions fraud-detection technology originally developed for its trade finance business.
“These types of financing arrangements are going to require much more due diligence, much greater technology, much more understanding of what you are financing,” said Roberts.
“I am more concerned and it’s something we’re very focused on.”
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This week, JPMorgan Chase chief executive officer Jamie Dimon warned that failures of First Brands as well as subprime auto lender Tricolor Holdings were unlikely to be the last. “When you see one cockroach, there are probably more,” Dimon said. “Everyone should be forewarned on this one.”
JPMorgan has taken a US$170 million charge against its exposure to Tricolor, but avoided any to First Brands. Discussing the hit from Tricolor, Dimon said it was “not our finest moment” and added that the bank had been scouring its books to look for other potential problems.
Jefferies Financial Group has been hit with redemption requests from clients who had money in a fund managed by the bank that helped finance First Brands.
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Point Bonita Capital had about a quarter of one of its portfolios linked to the failed company. Cantor Fitzgerald is trying to change the terms of its acquisition of UBS Group AG’s O’Connor hedge fund due to the scale of the losses it is facing from the First Brands bankruptcy, Bloomberg News reported last week. BLOOMBERG
