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INTRODUCTION:-
HSBC in India
HSBC's origins in India date back to 1853, when the Mercantile Bank of India wasestablished in Mumbai. The Bank has since, steadily grown in reach and service offerings,
keeping pace with the evolving banking and financial needs of its customers.
In India, the Bank offers a comprehensive suite of world-class products and services to its
corporate and commercial banking clients as also to a fast growing personal banking
customer base. Since our inception, we have entered new markets and launched innovative
new products to help our clients seize investment opportunities around the world.
The HSBC group was founded in Hong Kong in 1865 to finance trade between the China
coast and Europe and the United States. Since then, the HSBC Group has expanded through
both internal growth and acquisition. Members of the Group include HSBC Private Bank
(UK) Limited (formerly Samuel Montagu & Co Limited), founded in 1853, HSBC Trinkaus
& Burkhardt KG (1785), HSBC Guyerzeller Bank AG (1866), HSBC Bank USA (formerly
Republic National Bank of New York) (1966) and Crédit Commercial de France (CCF,
1894).
HSBC Private Bank (formerly HSBC (Republic) was established on 31 December 1999,
when HSBC acquired Republic New York Corporation and Safra Republic Holdings, parent
companies of Republic National Bank of New York. Founded in 1966 and built on a banking
tradition established during the Ottoman Empire, Republic National Bank of New York
specialized in private banking. Since then, our business has grown substantially, both
organically and through acquisition.
We are currently building a strong onshore business to complement our historical franchise.
The marketing name HSBC Private Bank was adopted on 1 January 2004. The use of the
label 'HSBC Private Bank' refers to HSBC's worldwide principal private banking business,
and is not indicative of any legal entity or relationship.
Our origins
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HSBC's History
The HSBC Group has an international pedigree which is unique. Many of its principal
companies opened for business over a century ago and they have a history rich in variety and
achievement.
Foundation and growth
The HSBC Group is named after its founding member, The Honking and Shanghai Banking
Corporation Limited, which was established in 1865 in Hong Kong and Shanghai to finance
the growing trade between China and Europe.
The inspiration behind the founding of the Bank was Thomas Sutherland, a Scot who was
then working as the Hong Kong Superintendent of the Peninsular and Oriental Steam
Navigation Company. He realized that there was considerable demand for local banking
facilities both in Hong Kong and along the China coast and he helped to establish the Bank in
March 1865. Then, as now, the Bank's headquarters were at 1 Queen's Road Central in Hong
Kong and a branch was opened one month later in Shanghai.
Throughout the late nineteenth and the early twentieth century‟s, the Bank established a
network of agencies and branches based mainly in China and South East Asia but also with
representation in the Indian sub-continent, Japan, Europe and North America. In many of its
branches the Bank was the pioneer of modern banking practices. From the outset, trade
finance was a strong feature of the Bank's business with bullion, exchange and merchant
banking also playing an important part. Additionally, the Bank issued notes in many
countries throughout the Far East.
During the Second World War the Bank was forced to close many branches and its head
office was temporarily moved to London. However, after the war the Bank played a key role
in the reconstruction of the Hong Kong economy and began to further diversify the
geographical spread of the Bank.
The making of the modern HSBC Group
The post-war political and economic changes in the world forced the Bank to analyse its
strategy for continued growth in the 1950s. The Bank diversified both its business and its
geographical spread through acquisitions and alliances. However, it remained committed to
its historical markets and played an important part in the reconstruction of Hong Kong where
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its branch network continued to expand.
In 1959 the bank completed two important purchases, those of The British Bank of the
Middle East (now HSBC Bank Middle East) and the Mercantile Bank. The British Bank of
the Middle East had begun life as the Imperial Bank of Persia in 1889 but throughout the
1940s and 1950s had extended its sphere of operations and pioneered banking in the Gulf
States. The history of Mercantile Bank stretched back to 1853 - the year it was founded in
Bombay (now Mumbai) - and by the 1950s it had a strong identity within Indian and other
Asian markets.
In 1965 the Bank purchased a controlling interest in Hang Seng Bank, which had been
established in Hong Kong in 1933. By the 1970s the policy of expansion by acquisition of
subsidiaries with their own identities and specializations was firmly in place.
During the 1980s the Bank concentrated on moving into those markets where it was not yet
fully represented. Hongkong Bank of Canada (now HSBC Bank Canada) was established in
1981 and Hongkong Bank of Australia (now HSBC Bank Australia Limited) in 1986. In 1987
Marine Midland Bank (now HSBC Bank USA), based in New York State, became a wholly
owned member of the Group and its principal subsidiary in the United States.
HSBC Holdings plc, the parent company of the HSBC Group, was established in 1991 with
its shares quoted on both the London and Hong Kong stock exchanges.
The acquisition in July 1992 of Midland Bank in the United Kingdom created one of the
largest banking and financial services organizations in the world. Midland was founded in
1836 in Birmingham and had grown in the nineteenth and twentieth century‟s through a
series of mergers and amalgamations. In 1974 Midland acquired the London merchant bank
of Samuel Montagu, whose own distinguished history stretches back to 1853. Samuel
Montagu has been integrated into HSBC Investment Bank, as has James Capel, a leading
London-based international securities company, which was acquired by the Group in 1986.
The 1990s have seen further expansion and consolidation of the various businesses of the
HSBC Group. In the United States, a joint venture, the Wells Fargo HSBC Trade Bank was
formed in 1995. Elsewhere in the Americas in 1997, a new subsidiary Banco HSBC
Bamerindus was established in Brazil; the acquisition of the Roberts Group (now called
HSBC Bank Argentina SA) in Argentina was completed, and a 19.9 per cent interest in
Mexico's Group Financiero Serfin was purchased. In 1999, HSBC Holdings plc signed a
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memorandum of understanding with the Government of Korea for the acquisition of a
controlling interest in Seoul Bank, one of the largest commercial banks in South Korea.
The HSBC Group now comprises a unique range of banks and financial service providers
around the globe.
Establishment and early the inspiration behind the founding of the bank was Thomas
Sutherland, a Scot who was then working for the Peninsular and Oriental Steam Navigation
Company. He realized that there was considerable demand for local banking facilities in
Hong Kong and on the China coast, and he helped to establish the bank which opened in
Hong Kong in March 1865 and in Shanghai a month later.
Soon after its formation, the bank began opening branches to expand the services it could
offer customers. Although that network reached as far as Europe and North America, the
emphasis was on building up representation in China and the rest of the Asia-Pacific region.
HSBC was a pioneer of modern banking practices in a number of countries – for instance, in
1888 it was the first bank to be established in Thailand, where it printed the country's first
banknotes.
From the outset trade finance was a strong feature of the local and international business of
the bank, an expertise that has been recognized throughout its history. Bullion, exchange,
merchant banking and note issuing also played an important part. In 1874, the bank handled
China's first public loan and thereafter issued most of China's public loans.
By the end of the century, after a strong period of growth and success under the leadership of
Thomas Jackson (chief manager for most of that period from 1876 to 1902), the bank was the
foremost financial institution in Asia.
Challenges and changes
The 20th century saw challenges and change for HSBC. In the early years of the 20th
century, HSBC widened the scope of its activities in the East. It became increasingly
involved in the issuing of loans to national governments, especially in China, to finance
modernization and internal infrastructure projects such as railway building. The First World
War brought disruption and dislocation to many businesses, but the 1920s saw a return to prosperity in the East as new industries were developed and trade in commodities such as
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rubber and tin soared. The bank's new head office in Hong Kong (1935) and the new
buildings at major branches such as Bangkok (1921), Manila (1922) and Shanghai (1923)
reflected this confidence.
The 1930s ushered in an era of uncertainty with economic recession and political turmoil in
many of the bank's markets. In the Second World War, the majority of the bank's staff in the
East became prisoners of war as the enemy advanced through Asia. The bank survived under
the new leadership of Arthur Morse, and through its prudent policy of building up large
reserves in peace time. At the end of the war, HSBC took on a key role in the reconstruction
of the Hong Kong economy. Its support for the skills of newcomers to Hong Kong was
especially vital to the upsurge in manufacturing in this period.
In other markets, however, HSBC needed to make major readjustments. Most of the mainland
offices in China were closed between 1949 and 1955, leaving only the Shanghai office to
continue its long and eventful service. These changes carried the risk that the bank was over-
concentrating its interests in Hong Kong.
The bank addressed this concern by diversifying through a series of alliances and
acquisitions. The purchases of the Mercantile Bank and the British Bank of the Middle East
in 1959 took HSBC into new pastures, and the formation of a merchant banking arm in 1972extended its range of services. By the 1970s the bank had firmly developed a policy of
expansion by acquisition or formation of subsidiaries with their own identities and expertise.
Making of the modern HSBC
In the later years of the 20th century HSBC moved from an important regional bank to one of
the world's leading financial services organizations. This transition was achieved by a number
of steps.
By the late 1970s HSBC's management had conceived the strategy of the 'three-legged stool'
with the legs of the stool representing the three markets of the Asia-Pacific region, the USA
and the UK. In the 1980s, the purchase of Marine Midland Bank in the USA represented the
acquisition of the second leg of the stool. HSBC then sought a similar purchase in the UK.
The initial target was the Royal Bank of Scotland but after this acquisition failed, attention
turned to Midland Bank and a 14.9 per cent stake was taken in 1987. After creating a new
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holding company, HSBC Holdings plc in 1991, HSBC then made a recommended offer for
full ownership of Midland in July 1992. The third leg was in place. As a result of the
formation of the new holding company and the acquisition of Midland Bank, HSBC became
headquartered in London.
HSBC continued to grow through a number of acquisitions across the globe. In November
1998, HSBC announced the adoption of a unified brand, using HSBC and the hexagon
symbol everywhere it operated, with the aim of enhancing recognition of HSBC by
customers, shareholders and staff throughout the world.
In the 21st century, HSBC has renewed its focus on its birthplace, growing its business in
China both organically and through a series of strategic partnerships. HSBC's diversification
and its core values of financial strength and stability have stood it in good stead in the recent
global turbulence in economies and markets, and it remains well placed to deal with an
uncertain world.
HSBC Group entities in India
The Hong Kong and Shanghai Banking Corporation Limited (HSBC)
HSBC Asset Management (India) Private Limited
HSBC Global Resourcing / HSBC Electronic Data Processing (India) Private Limited
HSBC Insurance Brokers (India) Private Limited
HSBC Operations and Processing Enterprise (India) Private Limited
HSBC Private Equity Management (Mauritius) Limited
HSBC Professional Services (India) Private Limited
HSBC Securities and Capital Markets (India) Private Limited
HSBC Software Development (India) Private Limited
HSBC Invest Direct (India) Limited
HSBC Group Entities in India
1. Commercial Banking
The Hong Kong and Shanghai Banking Corporation Limited (HSBC)
(i) Personal Banking:-
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HSBC offers a wide range of retail banking and wealth management services, including
personal lending and deposit products, through its branch network in Ahmadabad, Bangalore,
Chennai, Chandigarh, Coimbatore, Gurgaon, Hyderabad, Jaipur, Kochi, Kolkata, Ludhiana,
Mumbai, New Delhi, Noida, Pune, Thane, Trivandrum and Visakhapatnam. Also offered
branch-wide are international Gold and Classic credit cards from VISA and MasterCard and
debit cards from Visa. Customers have access to 24-hour banking services through an
extensive network of automated teller machines (ATMs), an integrated Call Centre, and
internet banking -online@hsbc .
(ii) Non Resident Indian Banking
HSBC's Non Resident Indian Banking (NRI) centres located in Asia-Pacific, the Middle East,
Europe and North America, together with HSBC's offices worldwide, provide the
international Indian Diaspora access to a range of products and services. These include NRI
related investment (both international and domestic), transactional and deposit products,
together with a full range of personal and private banking products in India and overseas.
Internet banking also provides easy access to HSBC's services.
(iii) Financial Planning Services
Services include investment and custodian management and access to stock broking and
insurance services, which are offered to resident as well as non-resident Indians.
(iv) Corporate Banking
HSBC has well-established, long-term corporate banking relationships with large domestic
Indian corporations and foreign multinationals operating in India. Services include term and
working capital finance, trade facilities, corporate deposits, syndications, payments and cash
management services and factoring.
(v) Business Banking
HSBC's Extra Mile Business Banking offers two types of account to small and medium-sized
businesses - The Business Account and the Business Vantage Account. Services include
Business Phone Banking, Business Doorstep Banking and Multi Branch Business Banking.
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(vi) Payments and Cash Management
HSBC provides integrated domestic and regional transaction support to corporate clients
through a sophisticated range of cash management solutions, including collection and
payment services and integration with customer back-end systems. Operations and client
services are ISO 9001 certified. Hexagon, the HSBC Group's dedicated electronic banking
service allows users to perform financial transactions, obtain international financial markets
information, and review details of their domestic and international accounts, from anywhere
in the world, 24 hours a day.
(vii) Trade (international and domestic) and Factoring Services
A wide range of solutions tailored to meet customer's requirements for both domestic and
international businesses is offered. HSBC is also one of the leading banks involved in the
bullion business through its offices in Ahmadabad, Bangalore, Chennai, Hyderabad, Kolkata,
New Delhi and is supported by the Group's global expertise in the precious metal business.
HSBC is the leading provider of trade services in India and its trade centres are ISO 9002
certified.
(viii) Institutional Banking
Working closely with Group offices in India and overseas, trade services, payments and cash
management, treasury and capital markets, custody and clearing, and correspondent and
electronic banking activities are offered to banks, financial institutions, securities houses,
insurance companies, asset management companies and other non-banking companies, non-
government and development organizations operating in India.
(viii)Treasury and Capital Markets
Clients consistently rate HSBC's Treasury business as one of the best in India. Its dealingroom in Mumbai is one of the largest in the country, serving clients in Mumbai and in the
major metropolitan centers across the country. It provides a comprehensive range of products
which include - foreign exchange, money market and fixed income products and derivatives
in both rupees and major currencies.
(xi) Custody and Clearing
The leading custodian in Asia, HSBC's custody and clearing services are available in 28
markets in Asia-Pacific and the Middle East. With experienced staff and the latest
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technology, HSBC is the premier provider of sub-custodian and clearing services to foreign
institutional investors (FIIs) in India. HSBC clients include the domestic fund management
sector in both the retail and institutional segments. Institutional Fund Services launched by
the bank offers a comprehensive suite of products to domestic mutual funds and insurance
companies ranging from custody, fund administration services, unit distribution and Cash
Management Services.
2. Technology
The HSBC Group develops and applies advanced technology to the efficient and convenient
delivery of banking and related financial services. In India, the Group provides:
Self-Service Banking with over 150 in-branch and off-branch ATMs and 24-hour
Phone Banking.
Trade and Corporate Banking services with real-time access to a centralised
information database
Instantaneous inter-city transactions through online connections between all branches
A state-of-the-art treasury dealing system
A sophisticated card system supporting debit and credit cards, domestic and
international VISA, MasterCard, and co-branded cards
A dedicated acquiring system for both MasterCard and Visa transactions
online@hsbc, HSBC's internet banking service, provides customers with an integrated
and secure platform to access their accounts.
Internet Payment Gateway handles credit card transactions on the internet
3. Asset Management
HSBC Asset Management (India) Private Limited provides a comprehensive range of
investment management solutions to a diverse client base and is committed for aiming to
deliver consistent investment performance, world-class service and a broad range of solutions
for all types of investors. Our range of offerings in India comes under two broad
categories Mutual Fund and Portfolio Management Services.
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4. HSBC Global Resourcing
HSBC Global Resourcing is the largest, captive, banking and financial services off shoring
organization in the world. A vital part of the HSBC Group's global strategy, Global
Resourcing plays a key role in delivering shareholder value and seamlessly integrates and
helps the Group remain competitive in the ever changing world of banking and finance.
Global Resourcing is present in India as HSBC Electronic Data Processing India Pvt. Ltd.,
and operates out of 7 Group Service Centres (GSC) in Hyderabad, Bangalore, Kolkata, and
Vishakhapatnam.
5. Insurance
HSBC Insurance Brokers (India) Private Limited is licensed by the Insurance Regulatory
Development Authority (IRDA) to operate as a composite insurance broking company, which
will function as a direct and a reinsurance broker.
6. Data Processing
HSBC Operations and Processing Enterprise (India) Private Limited, through two
centres in Mumbai and Chennai, provides operational processing services for HSBC offices
in India.
7. Private Equity
HSBC Private Equity Management (Mauritius) Limited a subsidiary of HSBC Private
Equity (Asia) Limited in Hong Kong, has a Liaison Office in Mumbai. The company
specializes in the provision of equity capital to unlisted growth companies in India and Sri
Lanka.
8. Audit Service
HSBC Professional Services (India) Private Limited provides internal audit services to the
HSBC Group's internal audit units worldwide, with particular emphasis on the IT, Treasury,
Asset Management, Private Banking and Insurance functions.
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Investment Banking
HSBC Securities and Capital Markets (India) Private Limited has two main business
lines. It‟s Institutional and proprietary broking business is based in Mumbai and, has seats
on two of India's premier stock exchanges, the Bombay Stock Exchange and the National
Stock Exchange. It deals in Indian securities for both Indian and international institutions
and for select retail clients and is backed by an extensive research team. The Corporate
Finance and Advisory business, with offices in Mumbai and New Delhi, offers a full
range of integrated investment banking services in India and internationally.
Software Development
HSBC Software Development (India) Private Limited has established a software centre in
Pune to develop solutions for HSBC's Group offices worldwide.
HSBC Invest Direct (India) Limited
HSBC Invest Direct (India) Limited (HIDL) with its headquarters in Mumbai, has a pan-
India presence and through its subsidiaries, offers a range of products & web based services
that include Stock Broking Services, Investment Advisory, Distribution of Financial productsand Securities related financing (NBFC), to individuals and corporate.
WHAT IS AN AUDIT?
An audit is the process of checking that the way an organization presents information about
its financial position (its „Financial Statement of Accounts‟) is true and fair. In essence, „true
and fair‟ means that, in the auditor‟s opinion, the company‟s financial statements offer a true
and fair view of its actual financial position, and that any assumptions they include are
reasonable.
That is not to say that an audit is designed to spot deliberate dishonesty, though it has been
known. Carrying out an audit is a complex and involved process which is most likely to
reveal oversights, accounting errors and over-optimistic predictions. Few unearth serious
issues such as fraud.
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A good way to visualize what an audit is all about is to imagine it as a far longer, more
complex, more challenging and more skeptical version of a cross-examination of „the
numbers‟ on Dragon‟s Den. An audit is also about gathering the evidence required to work
out whether an organization‟s claims about profit, for instance, are true and fair.
Once the audit process is complete, an organization can publish a set of „audited accounts‟ –
essentially a detailed description of its financial position which has been verified by its
auditors.
The auditor will write an Auditor‟s Report, which essentially sets out an opinion on the truth
and fairness of the audited organization‟s financial statement of accounts, based on the
evidence gathered during the audit process.
THE AUDIT PROCESS
ICAEW .Finally, the government‟s accounts are also audited annually, with this work carried
out by the National Audit Office.
Who carries out an audit?
Audits must be carried out by a person or, more commonly, a team of people deemed to be
competent, independent and unbiased. In most cases, the organization undergoing an audit
will pay a public accounting firm to carry out the audit process. However, the accounting
firm must possess a Licence to Audit and be registered with one of the UK‟s „Recognized
Supervisory Bodies‟.
How is an audit carried out?
Exactly how an audit is carried out will depend on the nature of the organization being
audited. However, most auditors follow a broadly similar process, working closely with their
clients‟ senior management and guided by a set of „International Standards‟ – essentially
these are designed to ensure that audits are carried out in the same way the world over, whilst
allowing auditors to follow rules and regulations set out by individual countries.
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In general terms, an audit will cover:
Planning and risk assessment: This is a process of getting to know the organization being
audited as well as any issues that commonly affect similar organizations when it comes to
financial reporting. The auditor will also use this process to identify any areas that may need
special attention.
Internal controls testing: This aspect of audit has become a lot more important in recent
years. It is about working out whether the control systems in use are sufficiently robust and
reliable, and whether they comply with any regulations the organization is subject to. The
results of this work will determine how the rest of the audit process is carried out
Substantive procedures: This is the process of gathering the evidence needed in order to
assess whether an organization‟s claims about its financial position are fair and accurate. The
strength of the organization‟s internal controls will go a long way to determining how
detailed this process is. Broadly, there are two substantive procedures:
Substantive Analytical Procedures: This process is used if internal controls are deemed to be
reliable and robust and is essentially the comparison of sets of financial information to see if
the accounts 'make sense' when viewed from different perspectives
Substantive Tests of Detail: If internal controls are deemed to be weak, absent, or have not
been tested, then a „test of detail‟ approach will be taken. In essence, this is a process
of selecting a sample of items from the organization‟s accounts, then finding hard evidence
(e.g. invoices, bank statements) to check that they have been properly accounted for.
Finalization: With all this assessment work carried out, the auditor will use the information
gathered to write a final report – which is an independent opinion of the organization‟s
financial position. The auditor will also prepare a letter or report for the organization‟s
management, setting out any important issues that came to light whilst the audit was being
carried out
What powers do auditors have?
It is important to understand that auditors are not the „finance police‟. They are not in a
position to dictate how an organization should go about its business or directly punish
organizations that engage in risky, underhand or deceitful activities.
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In essence, the auditor‟s power lies in the fact that their opinion on a organization‟s financial
position is seen as important by the organization itself and by anyone with an interest in the
health of the organization – shareholders, suppliers, customers, tax authorities to name just a
few. This opinion is trusted enough to affect the decisions these groups make about their
own dealings with the organization.
In addition, the fact that audited accounts and an auditor‟s report are important tools for these
groups encourages organizations to „self -regulate‟ – shying away from dubious accounting
practices because “We‟d never get it past the auditor.”
HOW IS AUDITED REGULATED?
The audit profession is very closely monitored and tightly regulated according to stringent
professional standards and legislation. Any breach of these rules can have severe
consequences for the individual or firm involved.
Three main groups are responsible for regulating and overseeing the way audits are carried
out:
The government, through legislation such as the Companies (Audit, Inspection and
Community Enterprise) Act 2004, Companies Act 2006 and the Statutory Auditors and ThirdCountry Auditors Regulations 2007, sets out the law and decides who should oversee the
work of auditors
The Financial Reporting Council (an independent body given powers to watch over the audit
profession by the government) works closely with accountancy organizations such as the
ICAEW to oversee their regulation of auditors, and independently assesses the quality of
audits carried out on behalf particularly large or important organizations
Professional bodies such as the ICAEW are responsible for supervising the activities and
performance of their members and ensuring that the professional qualifications they operate
cover all the latest rules, regulations, approaches and techniques.
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The internal audit function in banks - final document
June 2012
The Basel Committee on Banking Supervision is issuing this revised supervisory guidance
for assessing the effectiveness of the internal audit function in banks, which forms part of the
Committee's ongoing efforts to address bank supervisory issues and enhance supervision
through guidance that encourages sound practices within banks. The document replaces the
2001 document internal audit in banks and the supervisor's relationship with auditors. It takes
into account developments in supervisory practices and in banking organizations and
incorporates lessons drawn from the recent financial crisis.
The document builds on the Committee's Principles for Enhancing Corporate
Governance which require banks to have an internal audit function with sufficient authority,
stature, independence, resources and access to the board of directors. Independent, competent
and qualified internal auditors are central to sound corporate governance.
The document is based on 20 principles, organized in three sections: A) Supervisory
expectations relevant to the internal audit function, B) The relationship of the supervisory
authority with the internal audit function, and C) Supervisory assessment of the internal audit
function. This approach seeks to promote a strong internal audit function within banking
organizations. It also encourages bank internal auditors to comply with and to contribute to
the development of national and international professional standards and it promotes due
consideration of prudential issues in the development of internal audit standards and
practices. An annex to the consultative document details responsibilities of a bank's audit
committee.
What is bank audit and its process for statutory auditors?
He Reserve Bank of India has tightened the norms for selection of central statutory auditors
for the public sector banks and financial institutions.
The selection process has been linked to appraisal system to be made on the basis of selected
parameters such as longer association of members with the firm, qualification of overall
employees and experience of bank audit.
On the other hand, the allotment of auditors to the banks is pegged to the asset size of the
banks. In the process, the total number of auditors to be selected for PSU banks and FIs has been trimmed to 146 from 181 earlier.
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This has resulted in discontentment among the auditors, who feel that the norms are far too
stringent for new firms to compete.
As per the new norms, banks with an asset size of Rs 50,000 crore (Rs 500 billion) will have
four auditors, followed by five auditors for banks with an asset base of Rs 50,000-1 lakh
crore and six for an asset size exceeding Rs 1 lakh crore.
Earlier, State Bank of India had 14 auditors, RBI had four auditors, and IDBI Bank and UTI
Bank had two auditors each. Every PSU bank had six auditors.
In a bid to encourage new firms, the RBI has decided to fill in 20 per cent of the total
vacancies with new firms as against 10 per cent earlier.
Independent Auditor’s Report to the Member of HSBC Bank
94 We have audited the group and parent company financial statements of HSBC Bank plc
(„the bank‟) for the year ended 31
December 2012 set out on pages 95 to 208. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the EU and, as regards the parent company financial statements, as
applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the bank's member, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might
state to the bank's member those matters we are required to state to them in an auditors' report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the bank and the bank's member, as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities Statement set out on page 93, the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit, and express an opinion on,
the financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices
Board's (APB's) Ethical Standards for Auditors.
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Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial
Reporting Council‟s website at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements In our opinion:
parent company's affairs as at 31 December 2012 and of the group's profit for the year then
ended;
adopted by the EU;
IFRSs as adopted by the EU And as applied in accordance with the provisions of the
Companies Act 2006; and
Companies Act 2006 and, as Regards the group financial statements, Article 4 of the IAS
Regulation. Opinion on other matter prescribed by the Companies Act 2006 In our opinion
the information given in the Directors' Report for the financial year for which the financial
statements are Prepared is consistent with the financial statements. Matters on which we are
required to report by exception we have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you
If, in Auditor opinion:
adequate for our audit have not been received from branches not visited by us; or the parent
company financial statements are not in agreement with the accounting records and returns;
or Certain disclosures of directors' remuneration specified by law are not made; or we have
not received all the information and explanations we require for our audit.
The following statement, which should be read in conjunction with the Auditor ‟s statement of
their responsibilities set out in their report on the next page, is made with a view to
distinguishing for shareholders the respective responsibilities of the Directors and of the
Auditor in relation to the financial statements.
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The Directors are responsible for preparing the Annual Report, the consolidated financial
statements of HSBC Bank plc and its subsidiaries (the „group‟) and parent company financial
statements for HSBC Bank plc (the „bank‟) in accordance with applicable laws and
regulations.
Company law requires the Directors to prepare group and parent company financial
statements for each financial year. The Directors are required to prepare the group financial
statements in accordance with IFRSs as adopted by the EU and have elected to prepare the
bank financial statements on the same basis.
Under company law the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the group and parent
company and of their profit or loss for that period. In preparing each of the group and parent
company financial statements, the Directors are required to:
that are reasonable and prudent; and
The Directors are required to prepare the financial statements on the going concern basis
unless it is not appropriate. Since the Directors are satisfied that the group has the resources
to continue in business for the foreseeable future, the
Financial statements continue to be prepared on a going concern basis.
The Directors have responsibility for ensuring that sufficient accounting records are kept that
disclose with reasonable accuracy at any time the financial position of the bank and enable
them to ensure that its financial statements
Comply with the Companies Act 2006.
The Directors have general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the group and to prevent and detect fraud and other
irregularities.
The Directors have responsibility for the maintenance and integrity of the Annual Report and
Accounts as they appear on the bank‟s website. Legislation in the UK governing the
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preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
The Directors, the names of whom are set out in the „Report of Directors: Governance‟
section on page 85 of this Annual Report, confirm to the best of their knowledge:
consolidated financial statements, which have been prepared in accordance with IFRSs as
issued by the IASB and as adopted by the EU, have been prepared in accordance with the
applicable set of accounting standards and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the bank and the undertakings included in the
consolidation taken as a whole; and that the group faces.
he management report represented by the Report of the Directors has been prepared in
accordance with rule 4.1.12(3) (b) of the Disclosure and Transparency Rules, and includes a
fair review of the development and performance of the business and the position of the bank
and the undertakings included in the consolidation as a whole, together with a description of
the principal risks and uncertainties.
Auditor's Report (HSBC Invest Direct (India))
Auditor have audited the attached balance sheet of HSBC Invest Direct (India) Limited (formerly IL&FS
Invest mart Limited) (the Company) as at 31March 2010, and the profit and loss account and the cash
flow statement for the year ended on that date annexed thereto. These financial statements are the
responsibility of the Companies management Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in India. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
As required by the Companies (Auditors Report) Order, 2003 and amendments thereto (together referred
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to as the Order) issued by the Central Government of India in terms of sub-section (4A) of section 227 of
the Companies Act, 1956, (the Act) we enclose in the Annexure, a statement on the matters specified in
paragraphs 4 and 5 of the said Order.
Without qualifying our opinion, we draw attention to Note I of Schedule L to the financial statements.
Reserve Bank of India (RBI) has conveyed to the Company that it is carrying on Non Banking Financial
Institution business without obtaining Certificate of Registration (CoR) under section 45-IA of Reserve
Bank of India Act, 1934. The Company has made an application for registration as Non Banking
Financial Company (NBFC) to RBI and approval is yet to be received. Pending receipt of CoR, RBI
guidelines applicable to NBFCs including prudential norms, disclosures in financial statements etc. are
presently not fully considered.
Further to our comments in the Annexure referred to above, Auditor report that:
(l) Auditor have obtained all the information and explanations, which to the best of our knowledge and
belief were necessary for the purposes of the audit
(ii) in Auditor opinion, proper books of account as required by law have been kept by the Company so
far as appears from our examination of those books
(iii) the balance sheet, profit and loss account and cash flow statement dealt with by this report are magreement with the books of account
(iv) in Auditor opinion, the balance sheet, profit and loss account and cash flow statement dealt with by
this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Act
(v) on the basis of written representations received from the Directors, as on 31 March 2010, and taken
on record by the Board of Directors, we report that none of the Directors are disqualified as on 31 March
2010 from being appointed as a Director in terms of clause (g)of sub-section (1) of section 274 of Act;
(vi) in Auditor opinion and to the best of our information and according to the explanations given to us,
they said financial statements together with the notes thereon, give the information required by the Act, in
the manner so required and give a true and fair view in conformity with the accounting principles
generally accepted in India
(a) in the case of the balance sheet, of the state of affairs of the Company as at 31 March 2010
(b) in the case of the profit and loss account, of the loss for the year ended on that date and
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(c) In the case of the cash flow statement, of the cash flows for the year ended on that date. Annexure to
Auditors Report - 31 March 2010 (Referred to in our report of even date)
(i) (A) The Company has maintained proper records showing full particulars, including quantitative
details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assets by which all fixed
assets are verified in a phased manner over a period of two years. In our opinion, this periodicity of
physical verification is reasonable having regard to the size of the Company and the nature of its assets.
No material discrepancies were noticed on such verification.
(c) Fixed assets disposed of during the year were not substantial, and therefore, do not affect the going
concern assumption.
(ii) (a) The Company has, on a periodic basis, conducted a verification of equity shares, mutual funds,
treasury bills and other securities held as stock in trade on the basis of actual verification or statement
received from its Depository Participant unit. In our opinion, the frequency of this verification is
reasonable.
(b) The procedures for the physical verification of stock in trade followed by the management are
reasonable and adequate in relation to the size of the Company and the nature of its business.
(c) The Company is maintaining proper records of stock in trade. There were no material discrepancies
noticed on verification between the dematerialized inventory records and the book records.
(iii) (a) The Company has granted loans to two companies covered in the register maintained under
section 301 of the Companies Act, 1956. The maximum amount outstanding during the year was Rs.
1,470.50 million and the yearend balance of such loans was Rs. 1,422.40 million.
(b) In Auditor opinion, the rate of interest and other terms and conditions on which loans have been
granted to companies, firms or other parties listed in the register maintained under section 301 of the
Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company.
(c) The borrowers have been regular in repaying the principal amounts as stipulated and m the payment
of interest.
(d) There is no overdue amount of more than rupees one lakh in respect of loans granted to any of the
companies listed in the register maintained under section 301.
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(e) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties
covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly,
paragraphs 4(iii)(f) and 4(iii)(g) of the Order are not applicable to the Company.
(iv) In Auditor opinion and according to the information and explanations given to us, there is an
adequate internal control system commensurate with the size of the Company and the nature of its
business with regard to purchase of stock in trade and fixed assets and with regard to the sale of services.
We have not observed any major weakness in the internal control system dunng the course of the audit.
(v) (a) In Auditor opinion and according to the information and explanations given to us, the particulars
of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in
the register required to be maintained under that section.
(b) In Auditor opinion, and according to the information and explanations given to us, the transactions
made in pursuance of contracts and arrangements referred to in (a) above and exceeding the value of Rs 5
lakh with any party during the year have been made at prices which are reasonable having regard to the
prevailing market prices at the relevant time.
(vi) The Company has not accepted any deposits from the public under the provisions of Section 58A
and 58AA of the Companies Act, 1956 and the rules framed there under.
(vii) In Auditor opinion, the Company has an internal audit system commensurate with the size and
nature of its business.
(viii) The Central Government has not prescribed the maintenance of cost records under section 209(l)(d)
of the Companies Act, 1956 for any of the services rendered by the Company.
(ix) (a) According to the information and explanations given to us and on the basis of our examination of
the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed
statutory dues including Provident Fund, Employees State Insurance, Income-tax, Service tax, Cess and
other material statutory dues have been regularly deposited during the year by the Company with the
appropriate authorities. As explained to us, the Company did not have any dues on account of Investor
Education and Protection Fund.
There were no dues on account of Cess under section 441A of the Act since the date from which the
aforesaid section comes into force has not yet been notified by the Central Government.
According to the information and explanations given to us, no undisputed amounts payable in respect of
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IMPORTANT ASPECTS
Financial considerations following bereavement
Assessing your own financial affairs after the death of a loved one
Turning to the future
When someone close to you dies, it can focus your mind on your own financial affairs, or
change your situation so significantly that you need to update your plans. As you begin to
come to terms with bereavement and start to think about the future, you may wish to consider
the following issues.
Making a will
Dealing with the affairs of a loved one who has died emphasizes how important it is for
family and friends that there is a valid will. If you have not already made your own will, you
may decide now is the time to do so. Or you may need to update an existing will, particularly
if you have lost a partner or child. For more guidance, you can contact your solicitor or a
special will writing service.
Dealing with the affairs of a loved one who has died emphasizes how important it is for
family and friends that there is a valid will
Reducing the effect of inheritance tax
Inheritance tax means the tax authorities can take a big slice of your estate when you die,
unless you have planned carefully. Inheritance tax is due on estates valued above £325,000,
at a rate of 40% on the amount over this threshold. To find out more about Inheritance tax,
visit HM Revenue and Customs.
Will your pension be enough?
If you have lost your partner, you may wish to review your personal pension arrangements to
check whether your retirement plans are still viable, or whether you need to increase your
contributions. You can do this by consulting your pension provider.
Provident Fund, Employees State Insurance, Income tax, Service tax, Cess and other material statutory
dues were in arrears as at March 31, 2010 for a period of more than six months from the date they became
payable.
Year End : Mar '12
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Protecting what's important
It's a good idea to check your insurance policies to make sure they are right for your new
circumstances. If you had life cover jointly with your deceased spouse or civil partner, talk to
your provider about adjusting the cover, or shop around for a new policy.
If the death has left you as the main breadwinner, you may also decide to take out extra
insurance such as critical illness cover or income protection cover. These products help
provide financial peace of mind if you are unable to work due to illness or injury.
You may be entitled to bereavement benefits
If the death of a partner means you have lost your main household income, you may be
entitled to financial help from the state. In England and Wales, bereavement benefits are paid
by the Department for Work and Pensions to widows and widowers or to a surviving civil
partner.
Bereavement benefits that you may be entitled to include:
Bereavement Payment – a one-off lump sum you claim when your spouse or civil partner
dies
Widowed Parent's Allowance – if you have dependent children
Bereavement Allowance – if you don't have dependent children
Find out more at the Government website or read the Department for Work and Pensions
guide Support after a death, practical help when someone dies. You can download this
at www.dwp.gov.uk or get a copy from your local register office or Job centre Plus.
Coping with debt
When someone dies with debts, it can create enormous pressure on those left behind.
Any outstanding debts, such as loans, will have to be paid off using the money in the estate.
Unless the person who died had credit card repayment protection insurance, any outstanding
balance on credit cards must also be paid.
If paying off the debts of a deceased relative has left you with money worries, talk to your
bank for advice and support. You can also get help from a Citizens Advice Bureau - search
for your local branch.
Where to get more information Check if you qualify for advice
If you have £50,000 or more in savings and investments, you may be eligible for HSBC
Premier Financial Advice.
If you don't qualify for HSBC Premier Financial Advice or if you'd rather not pay for advice,
see other ways.
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Eligibility requirements
HSBC Premier Financial Advice is available to UK residents who have £50,000 or more in
Savings and Investments and who are at least 18 years old at the time of the initial
consultation.
You'll also need to have an HSBC Current Account or Savings Account for us to be able to
deduct your fee. We can accept payment from a first direct Current or Savings Account too.
To find out more:
See our HSBC Premier Financial Advice
Call us on 0800 328 1298 to book an initial no-obligation consultation with an adviser. Lines
are open Monday to Friday 8am to 9pm and 9:30am to 7pm on Saturday. (Text
phone: 18001 0800 028 0126).
If you don‟t qualify for HSBC Premier Financial Advice, or if you‟d prefer not to pay for
advice, see other ways we can help.
If you are not a UK resident, see our HSBC Expat service.
HSBC will writing service – our experienced team of advisers can help you write your will.
We also provide professional and impartial executorships services.
The value of your pension can fall as well as rise and you may not get back the amount you
invested. Pension‟s contributions are normally tied up until you take your retirement benefits.
Special Audit
A special review entails a comprehensive and objective examination of the business
underlying the numbers. It assists management to identify and focus on key areas and issues
and provides insights and comfort to them as well as to outside interests. We provide services
on specific audit assignments like cost audits, fraud investigations, investment audits,
compliance audits, salary audits, certification of sales and other special assignments
necessary to provide assurance to management and interested parties.
RBI to conduct special audit
The Reserve Bank of India (RBI) has appointed two audit firms for conducting a special audit
of Bank of Rajasthan following detection of some irregularities. Deloitte & Touché
Consulting India will conduct a special IS audit of the bank while Deloitte, Haskins & Sells
will conduct a special audit of the books and accounts of the bank under section 30(1B) of the
Banking Regulation Act, 1949, BoR said on Monday.
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On February 25, the Reserve Bank of India had imposed a monetary penalty of Rs 25 lakh on
Bank of Rajasthan private sector bank for major lapses. The penalty was levied for violation
of the RBI's directions issued under Section 35A of the Banking Regulation Act, 1949 in the
area of acquisition of immovable properties, deletion of records in the bank's IT systems,
non-adherence to know your customer/anti money laundering guidelines in the opening and
conduct of certain accounts, irregularities in the conduct of accounts of a corporate group and
failure to provide certain documents sought by the RBI and misrepresenting that such
documents were not available, the RBI had said earlier.
The penalty was imposed on the bank in exercise of powers vested in it under the provisions
of Section 47A (1)(b) of the Banking Regulation Act, 1949, the RBI said. The RBI had issued
a show-cause notice to the bank, in response to which the bank submitted a written reply.
"Based on the reply, the Reserve Bank came to the conclusion that the violation was
substantiated and warranted imposition of penalty. Accordingly, it penalized the bank," the
central bank said.
Promoted by Praveen Kumar Tayal, Bank of Rajasthan has been reducing the private stake in
a phased manner. Tayal's stake was lowered from 44 per cent to 28.6 per cent in the last two
years.
The bank was taken over by the Tayals after a bitter battle with the Calcutta-based Bangurs.
BoR made a loss of Rs 44.70 crore during the quarter ended December 2009 as against a
profit of Rs 49.21 crore in the same period of last year.
TYPE OF INSTRUMENT
1] Financial Instruments
Equities
Equities are a type of security that represents the ownership in a company. Equities are traded
(bought and sold) in stock markets. Alternatively, they can be purchased via the Initial Public
Offering (IPO) route, i.e. directly from the company. Investing in equities is a good long-term
investment option as the returns on equities over a long time horizon are generally higher
than most other investment avenues. However, along with the possibility of greater returns
comes greater risk.
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Mutual funds
A mutual fund allows a group of people to pool their money together and have it
professionally managed, in keeping with a predetermined investment objective. This
investment avenue is popular because of its cost-efficiency, risk-diversification, professional
management and sound regulation. You can invest as little as Rs. 1,000 per month in a
mutual fund. There are various general and thematic mutual funds to choose from and the risk
and return possibilities vary accordingly.
Bonds
Bonds are fixed income instruments which are issued for the purpose of raising capital. Both
private entities, such as companies, financial institutions, and the central or state government
and other government institutions use this instrument as a means of garnering funds. Bonds
issued by the Government carry the lowest level of risk but could deliver fair returns.
Deposits
Investing in bank or post-office deposits is a very common way of securing surplus funds.
These instruments are at the low end of the risk-return spectrum.
Cash equivalents
These are relatively safe and highly liquid investment options. Treasury bills and money
market funds are cash equivalents.
2] Non-financial Instruments
Real estate
With the ever-increasing cost of land, real estate has come up as a profitable investment
proposition.
Gold
The 'yellow metal' is a preferred investment option, particularly when markets are volatile.
Today, beyond physical gold, a number of products which derive their value from the price of
gold are available for investment. These include gold futures and gold exchange traded funds.
Mutual Funds are subject to market risk. Please read the offer document carefully before
investing. Terms and Conditions apply.
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Bank Guarantee / Standby Letter of Credit Bank Instruments
Business Relationship (BG/SBLC)
Why Bank Guarantee or SBLC? Click on this link www.bgsblc.wordpress.com
Enhance your international transactions for smooth and fast business.
For: BANK GUARANTEE (BG)/STANDBY LETTER OF CREDIT (SBLC)- Cash
Back/Loan/Credit
Our provider is ready, willing and able to provide to your company any amount of face value
of Bank Guarantee or Standby letter of credit fresh cut backed by funds delivered direct to
your bank if you are willing, ready and able to LEASE or BUY bank instruments from us.
(HSBC Bank instruments or AA Rated European/American Banks instruments)
Description of instrument
Instrument: Bank Guarantee (BG)/ Standby Letter of Credit (SBLC).
Total Face Value: Minimum of 1M EUR/USD (One Million EUR/USD) to Maximum of 50B
EUR/USD (Fifty Billion EUR/USD).
Issuing Bank: HSBC Bank Holding Plc (Group)/AA Rated European / American BanksAge: One Year, One Day
Buy/Leasing Price: 48%/6% of Face Value plus 2% commission fees to brokers
Delivery: Bank to Bank SWIFT.
Payment: MT-760.
Hard Copy: Bonded Courier within 7 banking days.
Internal Control system
The Board is ultimately responsible for the bank‟s system of internal control and for
reviewing its effectiveness. Such procedures are designed to manage rather than to eliminate
the risk of failure, to achieve business objectives and can only provide reasonable and not
absolute assurance against material error, losses or fraud.
The bank has delegated specific, clear and unequivocal authority to the Chief Executive
Officer to manage the activities of the bank within the limits set by it. Functional, operating
and financial reporting standards are applicable within all entities of the HSBC Group. Theseare supplemented by operating standards set by the bank‟s management, as required.
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Systems and procedures are in place in the bank to identify, control and to report on the major
risks including credit, market, liquidity, operational error and fraud. Exposure to these risks is
monitored by the Executive Committee, the Asset and Liability Management Committee and
the Risk Management Committee.
Comprehensive annual financial plans are prepared, reviewed and approved by the Board.
Results are monitored and reports on progress compared with plan are prepared monthly.
Financial accounting and reporting and certain management reporting standards have been
established. Centralized functional control is exercised over all computer system
developments and operations.
Common systems are employed where possible for similar business processes.
Responsibilities for financial performance against plans and for capital expenditure, credit
exposures and market risk exposures are delegated with limits to line management. In
addition, functional management in the bank has been given the responsibility to implement
HSBC policies, procedures and standards in the areas of finance; legal and regulatory
compliance; internal audit; human resources; credit risk; market risk; operational risk;
computer systems and operations; property management; and for certain HSBC Group
business and product lines.
The Chief Risk Officer is responsible for the management of specific risks within the bank
including credit risk in the wholesale and retail portfolios, markets risk and operational risk.
Risks are monitored via regular Risk Management Committee meetings and through
reporting to the Executive Committee and to the Board.
The internal audit function monitors compliance with policies and standards and the
effectiveness of internal control structures within the bank and its subsidiaries. The work of
the internal audit function focuses on areas of greatest risk as determined by a risk
management approach.
The bank‟s Compliance Department ensures that HSBC Bank Malta Group and its employees
maintain the highest standards of corporate conduct including compliance with all the local
and international regulatory obligations and HSBC Group ethical standards and regulations.
Through the Audit and Risk Committee, the Board reviews the processes and procedures to
ensure the effectiveness of the system of internal control of the bank and its subsidiaries,which are monitored by internal audit.