17/07/2012 World Business Report

shortly 400 kilometres above Earth. It's carrying supplies and

experiments and astronauts from Japan, Russia and the United States.

Those are the latest headlines from BBC World News. Now for the latest

financial news with Sally and World Business Report. Welcome to World

Business Report. The headlines: Money laundering and doing business

with firms linked to terrorism, the headlines couldn't get any worse of

HSBC. I'm Rico Hizon. Falling investment in the Chinese property

sector and rising production costs. Third time lucky? Yahoo poaches a

top Google executive to become CEO number three in the space of a year.

Europe's largest bank HSBC allowed drug money to be laundered through

its American operations for nearly a decade. That's the conclusion of

a US Senate investigation. Between 2007 and 2008 $7 billion was moved

from the bank's Mexican operations, an amount authorities claim could

only have come from the drugs trade. Suspicious funds from Syria, the

Cayman Islands, Iran and Saudi Arabia also passed through the bank.

HSBC says its executives will apologise for the lapses at a

hearing in the US later today and promises to fix the problems. The

US Justice Department said it is conducting a criminal investigation

into the bank's operations. Let's go live to Hong Kong, the original

home of HSBC, and speak to the BBC's Juliana Liu, who has been

talking to the bank. What has been their reaction? I received a

statement from her -- HSBC in the morning. They report from the

Senate sub-committee was leaked ahead of the actual hearing on

Tuesday. Washington felt they had to respond. This is what they are

saying, we will apologise. Acknowledge these mistakes. We will

give our commitment to fixing what went wrong. They also said they

would be putting a lot more money globally into compliance operations.

It seems like they plan to acknowledge what went wrong and try

to move on. Shares in Hong Kong were up 2%. Banking analysts say it

is too early for them to give their reaction. Thank you. Joining me now

is James Bevan, Chief Investment Officer at CCLA Investment

Management. You hear about these headlines today and it -- I imagine,

what else are they up to? If it is extraordinary. Can it get worse?

This Senate report, over 300 pages long, has taken a very long time to

come to press. HSBC have made very little changes. This is closing the

door after the horse has bolted. There will be a substantial fine.

These excesses came during the boom years for the banking sector.

will say we are sorry. Changes are being made. The report says

pervasively polluted culture at HSBC. This HSBC. This nd

time again. This is very serious. Of course. The eyes of regulators

and others were not on what is going on. Let's roll D clock back.

They were not worried about what they were buying. Did you check

carry on regardless. A lapse of concentration from management.

you think this is enough, headlines are coming in daily.

it is enough to see change in the long-term? When the bad headlines

go away, go away, we are in another boom time, let's say that is in years to

come, will it collapse again? Governments need to take the

regulation of banks much more seriously. How will this happen?

How did this happen? Regulators were not on their game. We have got

a fast banking sector, it is paying the bills, let's keep it going.

That was the mistake. We will be covering more on what is going on

with banking. Later today Federal Reserve Chairman, Ben Bernanke,

delivers his semi-annual Monetary Policy report to Congress. But

analysts will be just as interested to hear what he has to say about

the LIBOR scandal. The stakes for US financial regulators have risen

since the Federal Reserve Bank of New York released documents last

Friday showing it learned of manipulation by the banks nearly

five years ago. Some US local authorities are now considering

suing banks accused of manipulating interest rates. The scandal over

the wrecking of the rates banks charge each other for loans has

crossed the Atlantic. -- rigging. have a responsibility to make sure

that every tax dollar is well spent. In this case $13 million of

taxpayers' money has been wasted. Possibly stolen. It is likely to be

one of many local American authorities who decide to sue over

this latest scandal. That could be just a start. Trillions of dollars

of transactions are depended on LIBOR. The bill for legal damages

could be enormous. American financial regulators are under fire.

Especially since the New York Federal Reserve, which supervises

Wall Street, knew about manipulation of LIBOR since 2008.

There is a tendency on banking regulators to be cheerleaders as

watchdogs of the banks under their jurisdictions. It is a cosy network.

I do think that the American regulators were more proactive than

their British counterparts. Maybe. That does not get much sympathy for

banks or US financial regulators. They condoned these practices for

many years. They have damaged municipalities and public trust in

the financial system. Barclays was the first bank to settle, it will

not be the last. Next in line for an of -- for an expensive line will

be the Swiss banking giant, UBS. -- expensive fine. Internet giant,

Yahoo reports earnings later today. The numbers are likely to be

overshadowed by the news that Marissa Mayer, one of the top

executives at Google, will be the next chief executive of Yahoo. She

was Google's 20th employ either stuck she -- employee. She faces an

uphill battle with Yahoo, re- establishing it as an internet

leader. Yahoo has struggled to turn its presence on the internet into

revenue. A glaring hole his mobile. Can they be successful? A lot of

money can be wasted chasing that product. Marissa Mayer is a product

person. It is going to be a very risky proposition. Filling the top

spot has been a headache for Yahoo. It has been threw four chief

executives in less than four years. Morrison -- Marissa Mayer is the

5th. Year who has struggled to retain top talent. -- Yahoo. The

job may be challenging, but she now joins a select group at the top of

Silicon Valley. What is going on in China? The fall in foreign direct

investment was due to declining investment in the real estate

market. Increasing production costs as well. Speculation has driven

property prices to unaffordable levels in many places across the

country. Premier Wen Jiabao has promised to keep proper in prices

to reasonable levels. -- property. Investment from major countries,

including Hong Kong, Macau and the Philippines was down 2.8%. US

investment was down by 3.2%. A rise came from the European Union,

despite their debt crisis. markets in Asia are all higher.