People often have a hard time saying "sorry," don't they? That one little word -- so fraught with weight, meaning, and of course, responsibility -- is hard enough for the average person who's cut in front of you in a parking lot to utter, let alone the CEO of major bank, no matter how obvious it is that his organization has been caught with its hand in the cookie jar.
But that's just what Stuart Gulliver, CEO of HSBC (NYSE:HSBC), said yesterday, in his announcement acknowledging the British-banking behemoth's wrongdoing in a money-laundering scheme that's going to cost his bank $1.92 billion in fines per the U.S. Department of Justice. Well done, Mr. Gulliver.
"We accept responsibility for our past mistakes," said Gulliver. "We have said we are profoundly sorry for them, and we do so again." Of course, HSBC isn't the only bank caught up in the D.O.J.'s dragnet. Standard Chartered (NASDAQOTH:SCBFF), the U.K.'s other banking giant, was also swept up, and will itself have to pay $327 million to U.S. authorities on a similar money-laundering charge. The particulars of both sets of charges are as follows:
- HSBC is charged with allowing Mexican drug cartels and Middle-East terrorist financiers to use the bank to launder money. In terms of the former, in 2002, HSBC acquired Grupo Financiero Bital, a Mexican bank HSBC recognized as having a weak compliance department. HSBC allegedly dithered in its attempts to ensure its new acquisition was cleaning up its oversight act, and so was indicted by the D.O.J.
- Standard Chartered, or StanChart as it's known, was accused by New York State's Department of Financial Services in August of hiding up to $250 billion in transactions with Iran over a period of 10 years. It already paid $340 million to said agency for those violations of U.S. sanctions, now it will pay the D.O.J. an extra $327 million for the same transgressions.No word yet on whether StanChart's CEO has put any mea culpas on record.
Now don't forget to take corrective action
Speaking of mea culpas, when JPMorgan Chase's (NYSE:JPM) London Whale surfaced earlier this year, CEO Jamie Dimon immediately took to the press and the airwaves, personally offering mea culpa after mea culpa, and talking about how his bank had made an "egregious" mistake, caused by "sloppiness and bad judgment."
Of course, he didn't stop there; he backed up his words with actions. In the months since the London Whale revelation, Dimon has gone on a major reorganization spree within the bank, starting with the wrenching dismissal of Ina Drew, his longtime lieutenant who was in charge of the business unit where the London Whale did his damage.
Saying you're sorry is a very simple act, but one that goes such a long way. It's the kind of admittedly squishy metric I'm a sucker for. I believe that when a CEO has the courage and humility to go on record admitting a mistake, it probably says a lot about how the organization is run, and how good of an investment it will turn out to be in the long run. Because so often, it's ego that can get in the way of real reform, not just in business or banking, but society at large.
For all the lawsuits, indictments, and allegations that have rained down on banks both here in the U.S. and across the pond in the U.K., "sorry" isn't a word you hear very often, but it's one, as a bank investor myself, I hope to hear more of.
Thanks for reading and for thinking. It's obvious I think highly of JPMorgan. Not only did it come through the financial crisis in excellent shape, due in no small part to the leadership of star CEO Jamie Dimon, it's also performing very strongly right now, period. And with a P/E of 9, I think it's also one of the great banking bargains out there. Find out more about this American superbank in The Motley Fool's just-published special report. In it, you'll learn where the key opportunities for JPMorgan lie, where its core growth will come from, all the potential business risks, and an analysis of its leadership team. Click here now for instant access.
Fool contributor John Grgurich owns no shares of any of the companies mentioned in this column. Follow John's dispatches from the bleeding edge of capitalism on Twitter @TMFGrgurich. The Motley Fool owns shares of JPMorgan Chase. The Motley Fool has a delightful disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.