Thursday, September 19, 2019
Martin Hennecke

HSBC warned of manipulation risk
<p>HSBC&#39;s (0005) auditors cautioned top executives that pressure to meet earnings targets gave managers an incentive to massage their numbers.</p><p>The warning contained in the bank&#39;s 2018 annual report from Pricewaterhouse Coopers focused on chief executive John Flint&#39;s aim of driving revenue at a faster pace than costs. It has been at the heart of his strategy to improve returns at the lender, whose global network stretches from New York, London to Shenzhen.</p><p>Flint&#39;s goal increased the &quot;incentive for management to override controls to meet targets,&quot; according to the auditor&#39;s summary, which was on page 211 of HSBC&#39;s 322-page filing. In the comments, which has never been reported, the accounting firm wrote the measure was vulnerable to misstatements because it was &quot;highly sensitive to small changes.&quot;</p><p>PwC, the bank&#39;s auditor since 2015, performed &quot;a number of incremental procedures which might indicate that revenue or costs were intentionally misstated,&quot; it said in the HSBC report. There was no evidence of wrongdoing, according to a person who asked not to be identified discussing a confidential topic.</p><p>At a global leadership summit held in Hong Kong in March, Flint rebuked top managers for missing revenue and cost targets, calling out executives for their &quot;incompetence&quot; and their inability to keep a rein on costs. As HSBC missed that goal in 2018, he reiterated the promise for 2019.</p><p>Meanwhile, the Hong Kong Monetary Authority denied the rumor which alleged a local bank may have financial problems due to mainland loans.</p><p>It said the claims are untrue and totally unfounded and urged members of the public to exercise discernment when dealing with online information.</p>

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