HSBC faces scrutiny after massive losses, while KPMG cuts hundreds of audit jobs

HSBC has been thrust into the spotlight after suffering losses linked to the collapse of mortgage broker Market Financial Solutions, with the financial damage reportedly reaching around $400 million.

The revelations have raised serious questions about risk management inside one of the world’s largest banks and reignited concerns over how aggressively lenders operate in the increasingly complex private credit market.

Although HSBC reportedly had no direct exposure to Market Financial Solutions itself, the bank became entangled through a structure involving Atlas SP Partners, a unit owned by investment giant Apollo Global Management. Atlas, which includes former Credit Suisse staff acquired by Apollo, had received what is known as “back leverage” financing from HSBC.

The arrangement reportedly involved layers of special-purpose vehicles with obscure names and highly technical lending structures. However, the underlying issue appears painfully simple: HSBC ended up carrying the losses after relying heavily on Apollo’s due diligence.

According to reports, as much as 80 per cent of the value of loans made to Market Financial Solutions from Atlas ultimately came from HSBC itself. That has intensified criticism that the bank may have trusted external assessments too heavily without conducting sufficient checks of its own.

The situation is especially awkward for HSBC chief executive Pam Kaur, who had previously warned publicly about the dangers of indirect financial exposure. Last year, Kaur reportedly cautioned against ignoring “second- and third-order risks” that emerge through weaker counterparties rather than direct lending relationships.

Industry observers say the episode highlights the dangers of modern private credit markets, where speed and deal volume often take priority over detailed scrutiny. Some bankers reportedly viewed the transaction more as an underwriting exercise than a long-term lending risk, meaning the emphasis may have been placed on quickly moving deals through the system rather than carefully examining every borrower.

Still, losses approaching half a billion dollars have sent shockwaves through the industry. Critics argue that underwriting mistakes are inevitable in finance, but losses on this scale raise concerns about whether warning signs were missed or ignored.

The controversy has also reignited longstanding criticism of financial sponsors in banking, an area often associated with aggressive dealmaking and rapid risk transfer. Analysts noted that the principle of maintaining “skin in the game”, ensuring lenders retain meaningful exposure to their own deals, exists precisely to prevent situations where risks are casually passed to others.

Meanwhile, a separate shockwave has hit Britain’s accounting sector. KPMG UK is reportedly preparing more than 500 redundancies, including over 400 positions within its audit division.

The cuts have stunned many employees because audit roles have traditionally been viewed as some of the safest jobs in professional services. Unlike advisory and consulting divisions, which rise and fall with economic cycles and merger activity, audit work has historically offered stability and long-term security.

However, KPMG’s problem appears to stem not from collapsing business but from unusually low staff turnover. The firm reportedly expected significant numbers of junior accountants to leave voluntarily over time, but attrition rates dropped sharply, leaving the company with more staff than anticipated.

Ironically, KPMG’s audit revenues reportedly rose by five per cent even as advisory revenues fell by three per cent. Yet that growth was still not enough to prevent major headcount reductions.

Together, the HSBC losses and KPMG redundancies reveal growing instability across sectors once viewed as untouchable pillars of the financial world.

From private credit disasters to unexpected job cuts, the message spreading through the industry is becoming increasingly clear: even the safest assumptions in finance no longer look secure.