CHPTER 1:-INTRODUCTION: 150 Years in India International Links Prime Lending Rate Banking Policies and Fair Practice

ice Codes HSBC in India HSBC's origins in India date back to 1853, when the Mercantile Bank of India was established 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. Our origins 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 Crdit 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.

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

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label 'HSBC Private Bank' refers to HSBC's worldwide principal private banking business, and is not indicative of any legal entity or relationship. 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 centurys, 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.

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The making of the modern HSBC Group The post-war political and economic changes in the world forced the Bank to analyses 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 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 centurys 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

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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 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

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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 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 overconcentrating 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 1972 extended 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: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,

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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. (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

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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, nongovernment 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 dealing room 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. 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

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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. 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.

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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. Investment Banking HSBC Securities and Capital Markets (India) Private Limited has two main business lines. Its 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 panIndia presence and through its subsidiaries, offers a range of products & web based services that include Stock Broking Services, Investment Advisory, Distribution of Financial products and Securities related financing (NBFC), to individuals and corporate.

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SWOT Analysis

STRENGTHS

WEAKNESSES

International Finance. Record Profits. Listed in London. China.

Poor Performance. Brand Name.

OPPORTUNITIES

THREATS

Growth on emerging economies. Biggest Bank in Middle East. Low mortgages interest rates.

Moving back to China. New Regulations. Fewer Revenues from the integration of financial markets.

STRENGTHS International Finance

Since HSBC is a global company itself is well qualified to advise other companies on aspects of international business. With offices around the world, for the international client HSBC often cannot be defeated in this area. HSBC knows how to succeed in Mergers and Acquisitions (M & E) and the organic and the effective development.

Record Profits Last year, HSBC experienced the most profits ever for a UK high street bank. HSBC have revealed their profits more than doubled in 2010 to 10 billion with every region in the black for the first time since 2006.

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Listed in London

HSBC is listed primarily in London and Hong Kong stock exchanges, which saves the company a lot of grief in complying with new U.S. legislation Sarbanes-Oxley law. Many companies have chosen to list on foreign stock exchanges, except America, because of expensive new regulations.

The bank is well capitalized and this has enabled it to perform relatively well against other banks in recent economic events.

The level of capitalization means that, going forward, the bank is unlikely to need to borrow from the UK government: this will enable it to retain more autonomy.

The bank has a strong presence in emerging markets, putting it in a good position to take advantage of future growth in those economies. The banks global presence in Europe, Asia and South America helps to spread risk and offers significant economies of scale.

Despite rebranding relatively recently (1999), the HSBC brand has become well-established and is considered particularly valuable within the industry.

WEAKNESSES

Poor Performance

There is a poor performance in the section ofpersonal finance services. HSBC try to fix these problem years ago. But the problem is there every year.

Brand Name

While it is certainly a global company, HSBC came late in the game to decide to execute a comprehensive marketing strategy and take advantage of the global brand. Because he had created so many different banks in different countries at different times over a period of one hundred years, which set them up with different names Hong Kong Bank of Canada, the British Bank of the Middle East, etc.

HSBC associates itself strongly with investment in the small business sector, but the current economic situation has led to increased risks, potentially compromising the activity levels in this area of the operation.

The bank was involved with sub-prime markets in the US and has had to write off large figures lent to high-risk borrowers.

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Despite falls in the UK interest rate, HSBC has increased its mortgage rates. This may be perceived negatively by borrowers and potential borrowers, adds pressure to an already depressed housing market and could ultimately lead to more defaulting as borrowers struggle with higher repayments.

A redundancy programme announced recently may affect morale among staff, leading to decreased production and loyalty. HSBCs branding emphasizes its global presence, and this may be seen negatively by some customers in its implication of homogenization and lack of personalization.

OPPORTUNITIES Growth on emerging economies

Apart from the growing Chinese middle class Brazilians and Indians have begun to appear as consumer culture, and thus increases wasteful consumers. Some residents of those countries in the past does not even own a bank account, but companies such as HSBC is ready to move in and benefit from the growing middle class in these areas. In places like Argentina and Turkey, HSBC experienced pre-tax profits by 50% in the past years. This is where it grows more.

Biggest Bank in the Middle East

The other banks are removed from the Middle East. However, HSBC has been running regional activities at the local level and have been rewarded for his efforts with numerous awards and honors for the Middle East market. HSBC is a trusted name there, and the company benefited from new democracy in Iraq by establishing a presence in the country. HSBC is the largest international bank in the Middle East.

Low Mortgages Interest Rates

The low mortgage interest rate increases the revenues and markets shares. HSBC has made some records on this.

Banks finding trading conditions particularly difficult at present may be available at low cost HSBC also has adequate capital to purchase stronger banks such as Bank Economic in Indonesia, in which it has purchased a stake to continue its Asian expansion despite challenging economic times.

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HSBCs generally strong position presents the opportunity to outperform competitors during the economic downturn and to build a reputation for being one of the safer banks for depositors, helping to increase resources for lending.

Negative press coverage of competitors such as HBOS may encourage customers to choose HSBC instead.

THREATS

Moving Back to China

The banking colossal HSBC has been most explicit threat yet that it might move its headquarters from London because of the narrowing regulatory noose.

New Regulations The investors of HSBC have been warned that future profitability will be affected by the new global policies designed to make the sector of financial more secure, but smoothed the blow with the promise of increasing dividends.

Trust in banks has decreased due to financial losses suffered by investors, who may be more inclined to invest elsewhere.

Financial losses affecting banks and investors on a global scale have resulted in less credit being available to customers. In the UK this is coupled with increases in living costs resulting in less money being saved.

The falling property market has created a rise in numbers of homeowners with negative equity. If a property is worth less than was borrowed to finance its purchase, there is little likelihood that the bank will recoup all its losses if owners default. Claims have been made that HSBC has understated losses resulting from US sub-prime markets, and this could undermine confidence in the bank.

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CHEPTER 2 INTRODUCTION TO BANK AUDIT 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 auditors opinion, the companys 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. 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 Dragons Den. An audit is also about gathering the evidence required to work out whether an organizations 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 Auditors Report, which essentially sets out an opinion on the truth and fairness of the audited organizations financial statement of accounts, based on the evidence gathered during the audit process. THE AUDIT PROCESS ICAEW .Finally, the governments 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

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firm must possess a License to Audit and be registered with one of the UKs 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. 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 organizations claims about its financial position are fair and accurate. The strength of the organizations 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 organizations accounts, then finding hard evidence (e.g. invoices, bank statements) to check that they have been properly accounted for.

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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 organizations financial position. The auditor will also prepare a letter or report for the organizations 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. In essence, the auditors power lies in the fact that their opinion on a organizations 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 auditors report are important tools for these groups encourages organizations to self-regulate shying away from dubious accounting practices because Wed 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 Third Country 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

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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. CHPTER 3 ANALYSIS

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 requires 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

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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. 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 Auditors 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.

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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. 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 Councils website at www.frc.org.uk/auditscopeukprivate. Opinion on financial statements in our opinion:

The financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2012 and of the group's profit for the year then ended;

The group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;

The parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU And as applied in accordance with the provisions of the Companies Act 2006; and

The financial statements have been prepared in accordance with the requirements of the 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 accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the

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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 Auditors 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. 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:

select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; and State whether they have been prepared in accordance with IFRSs as adopted by the EU.

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

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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 banks website. Legislation in the UK governing the 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:

In accordance with rule of the Disclosure and Transparency Rules, the 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.

The 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.

Auditors responsibility Auditor responsibility is to express an opinion on these financial statements based on our audit. This report, including the opinion, has been prepared for and only for the Companys members as a body in accordance with Article 179 of the Act, and Article 31 of the Banking Act, 1994 (Chapter 371, Laws of Malta), and may not be appropriate for any other purpose. In addition, we read the other information contained in the Annual Report 2012 and consider whether it is consistent with the audited financial statements. We consider the implications

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for our report if we become aware of any apparent material misstatements of fact or material inconsistencies with the financial statements. Auditor conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entitys preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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. Those standards 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

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basis for our opinion. As required by the Companies (Auditors Report) Order, 2003 and amendments thereto (together referred 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 m agreement 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

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(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 (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

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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. (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

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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 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. IMPORTANT ASPECTS Financial considerations following bereavement Year End : Mar '12 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?

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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. 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.

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 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. 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. 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 & Touch 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. 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

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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. 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.

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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. 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

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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) Internal Control system The Board is ultimately responsible for the banks system of internal control and fo r 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. These are supplemented by operating standards set by the banks management, as required. 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.

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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 banks 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. CHEPTER 4 CONCLUSION & RECOMMEDATIONS Recommendations And Conclusions Of HSBC As long as the wider economic situation remains doubtful, it is advisable for HSBC to adopt a wait-and-see approach - and a careful look at their businesses, stress testing them for both economic downturn and full-blown recession. It would be useful to factor in the wider commercial and operational impacts through combined risk, valuation, economics, operations and HR teams. Certainly, for financial services firms like HSBC, crisis management still necessary in the form of asset and portfolio revaluation on a mark-to model basis for both management and constitutional accounting purposes - and this may need some independent validation. Within the last decade the best consumer bank HSBC garnered awards along with soaring rankings. This was just one of those awards won by the HSBC in its excellent performance. Such achievements, rankings, and awards can be directly resulting from HSBC's business strategies. As the last decade's success is not ever lasting due to increased competition in the industry facilitated by globalization, trade liberalization rather is become more difficult for the corporation to maintain its leading position through offering the excellence in the service. The company needs to add diverse values to its strategy to establish its position in the target segment.

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 HSBC needs to play their pricing strategies very carefully; as it has generated many hundreds of millions of pounds per annum in revenue from these charges. Review operational capability to handle the situation, with particular focus on: effectiveness of the process, infrastructure along with functional capacity (front, middle, back office) and straight through process/workflow evaluation. The expectations of the Customers of the Retail Banking industry towards the service providers is getting higher to get their transactional needs right for every time. At this time all the organizations now understand the importance of knowing their customers as individually and uniquely as possible. This means understanding individual needs and then being able to relate those individual needs to the actual priorities of each customer at any given point in time. Few systems have the ability to provide insight into a customer lifecycle or into current customer priorities as transactions' systems do. In mature markets with high barriers to entry and which display stable market share, data mining can be vastly effective in generating new revenue streams and in establishing a differentiated service proposition. Successful data mining will include the use of refined cross-examination tools and a periodic ad hoc analysis along with data warehouse. Success is determined by integrated process management, detailed transactions analysis and alignment with a clear customer segmentation and strategy. Small and Medium Enterprises have become key players in the retail banking industry as its segment it getting bigger day by day with the globalization and increased competition. A careful selection of SMEs and product modification to attract those SMEs can help HSBC may generate increased revenue. As interest rate is a parameter which plays a key role in the banking industry and investment industry, HSBC can tailor its product in a way where the customer will be attracted and communicate the benefit of the product to the target market to gain competitive advantage. Economic profit may be easier to manage though the environment is more competitive than before by simplifying the investment decision and clarifying the accountabilities. Understanding the value of the customers and identify the sacrifice the bank will have to make to that is the vital issue.

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 Investing in understanding and developing this aspect of their service to customers is a parallel, to develop new products, services, markets and pricing strategies. Operational and business interactions may be obtained by bringing the transactions management at the same place, and these scale efficiencies may also be applied to effective risk and incident/ disaster management. Results for the affected banks are definitely substantial which damage to their good will, opportunity loss of potential revenue and also the cost of modification and remediation. For the people involved in managing the incident it was an uncomfortable time: dealing with imperfect and incomplete data while trying to provide coherent and reliable information to many internal and external stakeholders.

BIBLIOGRAPHY

1. www.HSBC bank .com 2. www.money control.com 3. www.wikipidiya.com 4. www.slideshare.com 5. www.scribed.com

THANK YOU

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