<ul>
<li>HSBC chairman Brendan Nelson says review found fraud to be a one-off</li>
<li>Shareholders question HSBC’s risk management at AGM</li>
<li>HSBC may recover some funds; actual loss not yet determined, Nelson says</li>
</ul>
By Lawrence White
LONDON, May 8 (Reuters) - HSBC (HSBA.L) has “substantially completed” a review of its lending policies and practises after it took a $400 million provision against a fraud in its UK business, Chairman Brendan Nelson told shareholders on Friday. The bank reported the unexpected charge, which sources told Reuters was linked to the collapse of British mortgage lender Market Financial Solutions, along with its first-quarter results on Tuesday.
“We have been looking at other facilities of a similar nature to see to what extent there are lessons to be learned,” Nelson told shareholders, adding that so far the bank has determined the issue to be a one-off rather than anything systemic.
HSBC’s potential loss was the latest sign of stresses in the $3.5 trillion private credit market, which has ballooned in recent years and more recently attracted scrutiny from regulators following some high-profile losses and questions about the opacity of the sector.
Shareholders questioned the bank’s risk management and lending procedures at its annual shareholder meeting in London on Friday, days after the lender’s shares fell 6% when it announced the surprise fraud hit.
HSBC may yet recover some of the money, Nelson said.
“We haven’t booked a loss yet, at the moment it is just a provision, there is a long way to go before we determine the actual amount lost,” Nelson said.
The bank has declined to comment on the identity of the company which triggered the loss, but two sources told Reuters on Tuesday it was related to the bank’s exposure to MFS via Apollo Global Management (APO.N) -linked unit Atlas SP.
A spokesperson for Atlas declined to comment on Tuesday.

HSBC

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- HSBC, led by Chairman Brendan Nelson, has completed a review of its lending practices following a $400 million provision against a fraud incident, linked to Market Financial Solutions.  
- Shareholders have expressed concerns regarding the bank's risk management during the annual meeting, particularly after a 6% drop in shares due to this unexpected charge.  
- Although HSBC may recover some funds, the actual loss is still undetermined, as the bank regards the fraud case as a one-off incident rather than indicative of systemic issues.

Reuters

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HSBC has reviewed lending policies after $400 million fraud hit, chairman says