UBS tried to explain subprime losses in a 50 page report. One glaring fact that stands out is a huge risk for HSBC, since HSBC did little or nothing to change HSBC Finance. UBS Said in part: “… its compensation structure for employees provided “insufficient incentives to protect the UBS franchise long-term.”" In other words when employees are rewarded with a ‘pay for perfomance’ compensation structure, the company loses, customers lose, and risks go out the window. That is exactly how HSBC rewards employees of HSBC Finance, parent or HFC and Beneficial.
Known for high interest rates and questionable programs, we received an email from a former employee which drives this point home. The former employee said “I worked for Beneficial for 11 years, and I left because they still overcharge customers with rates. Right now I am closing loans at a 6.0 rate versus Beneficial that is charging over 11% with the same credit profile.” With the same credit profile! These borrowers, however, are not the one who put HSBC and UBS at risk. It’s the borrower who should not be approved no matter what, but is approved anyway so employees can earn a bigger check. Therein lies the problem. UBS recognized it. Does HSBC USA and HSBC Finance see the truth yet? Time will tell.
For all the details on UBS, and where they placed the blame see this article. For more employee comments and HSBC complaints see our focused blog.
Related posts:
