HSBC yields to shareholders on pay as flags Brexit danger

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[April 22, 2016]  By Lawrence White and Sinead Cruise

LONDON (Reuters) - HSBC changed its pay policy for executive directors on Friday, bowing to shareholder concerns triggered by a drop in the bank's share price and worries over its dividend.

The overhaul of HSBC's pay, which it said would lower the maximum amount its executive directors could earn by 7 percent, follows investor revolts at BP and Anglo American over remuneration policies.

Europe's biggest bank told shareholders at its annual meeting in London on Friday that it would cut the amount of cash given to executive directors in lieu of a pension from 50 percent to 30 percent of their base salary.

It will also make long-term incentives subject to a three year forward-looking performance period, in line with other FTSE companies.

At the meeting, 96 percent of shareholders who voted approved the new measures which had been proposed earlier.

"We had expected that the Remuneration Policy you approved back in 2014 would not need to be refreshed until it expired next year," Chairman Douglas Flint told them before the vote.

"However, regulatory changes as well as responding to shareholder feedback have caused us to make some revisions to this," he said.

HSBC also said it could be forced to restructure its wholesale operations in the UK if Britain voted to leave the European Union in June's referendum.

"Our own economic research is very clear about the advantages of Britain being at the heart of a reformed EU," Flint said. "We believe that the UK would enter a period of great economic uncertainty in the event of a vote to leave."

U.S. LICENSEFlint said the bank was doing everything it had promised to do to avoid the loss of its U.S. banking license, following alleged failures to impress a monitor supervising a reboot of its anti-money laundering (AML) compliance program.In 2012, HSBC was fined $1.9 billion by the U.S. government, who said it had become a "preferred financial institution" for drug cartels and money launderers and had conducted transactions for customers in several countries subject to U.S. sanctions.

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"The DOJ (Department of Justice) in its most recent letter would echo that although HSBC has made significant progress, the bank continues to face significant challenges in implementing AML prevention," Flint said in response to an investor's question at the meeting.

"So we have work to do but at same time, the DOJ said that, overall, HSBC continues to take significant steps."

The chairman also sought to play down the bank's links to the "Panama Papers" scandal, which exposed the role played by scores of global banks in helping clients hide wealth in secretive offshore companies.

Flint said that less than 5 percent of 2,000 offshore structures it helped to create still existed.

(Additional reporting by Andrew MacAskill; Editing by Rachel Armstrong and Alexander Smith)

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