By Namini Wijedasa At least five senior managers of HSBC Sri Lanka, including its Head of Corporate Banking, have been sacked after an investigation into allegations that they fudged incentives-linked performance figures. Two others, the Head of Human Resource and Head of Compliance, were asked to resign over separate irregularities and at least one other [...]

News

Figure-fudging charge: Five HSBC senior managers fired

View(s):

By Namini Wijedasa

At least five senior managers of HSBC Sri Lanka, including its Head of Corporate Banking, have been sacked after an investigation into allegations that they fudged incentives-linked performance figures.

Two others, the Head of Human Resource and Head of Compliance, were asked to resign over separate irregularities and at least one other senior manager — the Chief Risk Officer — was suspended in the biggest ever shakeup at the local branch of the multinational banking corporation.

“HSBC Sri Lanka has made important senior management changes following an internal investigation,” a spokesperson confirmed. “We can’t comment on individuals but we can confirm a number of executives have left the bank as a result of this investigation.”

He added that HSBC was committed to implementing and enforcing the highest standards of practice and professional standards of behaviour worldwide. Among the terminated employees were two Relationship Managers in the Corporate Banking team. Their main task was to work directly with clients. The Corporate Banking team is placed high in the organisational structure of the local branch. Corporate Banking head Chamira Wijetilleke was fired after his and the actions of several others were investigated by an international HSBC team that travelled to Sri Lanka for the purpose. He told the Sunday Times: “I have served the bank diligently and loyally for the past 12 years and there has not been any allegation against me in the past. All comments and remarks which are presently made are baseless.

“I was not called for any inquiry and whatever purported findings have been made ex-parte. I am unable to comment any further at this stage as my legal counsel is handling this matter.” Authoritative sources said that Mr. Wijetilleke had first been suspended, prompting him to file legal suit claiming loss of reputation.

The practice of manipulating performance figures had been prevalent at HSBC Sri Lanka for a while, although it was not immediately clear how long, inquiries by the Sunday Times revealed. But it was only brought to the notice of the bank’s topmost managers after a junior officer in the Corporate Banking team was suspended pending investigations into related allegations. He turned whistleblower, supplying documentary evidence to prove that his supervisors were aware of the figure-fudging.
HSBC has performance-driven remuneration schemes. It sets targets that are linked to incentives, particularly annual bonuses. The Corporate Banking team also carries out its activities on this equation, actively canvassing patronage from the business world in a bid to boost bank revenues.

Once performance targets are set for a particular year, however, there is no added reward for surpassing them or overachieving. “Under the bank’s Performance Management System, the rewards are locked in once you reach your target,” said a senior industry source, on condition of anonymity.

However, it was typical for the HSBC Corporate Banking team to overachieve on their targets in the first quarters of a financial year. But since it did not entail any additional benefit, they had contrived to spread out this increase — or to defer it — to the first quarter of the new financial year, thereby enabling them to kick off that year with a cushion. It effectively ensured that they were not under too much pressure to meet performance targets set for the new financial year.

This was done by manipulating interest rates on loans taken by corporate customers. “They would lower the interest rate due on loans by certain percentage points in the final quarter of the year so that revenues drop,” the source said. “They would catch up for this by increasing the interest by the corresponding number of percentage points in the first quarter of the next year.”
“The companies concerned many not necessarily even have known what was going on,” another banking source said. “It is understood that they were mostly accounts where interest was charged once a quarter or once in six months, not every month. In the banking system, it just shows up as interest receivable. The bank will adjust it at payment time.”

The practice is wrong and unethical, he stressed. “The bank ends up paying for performance that was not there that particular year and which had been deferred from the previous financial year,” he pointed out. “This is a downside of purely performance-driven remuneration schemes. It also gives an employee the incentive to fudge the numbers.”

Advertising Rates

Please contact the advertising office on 011 - 2479521 for the advertising rates.