THE STATE-SPONSORED bailouts of western banks risk rewarding management teams for failure, the chief executive of HSBC warned yesterday.

Michael Geoghegan's comments reflect a deep frustration at recent bailouts among executives at HSBC, which, despite suffering heavy losses in the US mortgage market, has weathered the credit crisis in better shape than many of its rivals.

"There is no question that guarantees have been given to failed managements," Mr Geoghegan said, adding that they risked distorting the market.

However, HSBC executives acknowledged the rescues in the US and Europe were necessary to stabilise the banking system and restore the flow of credit to the economy.

Mr Geoghegan was speaking as HSBC signalled that the recovery in its US consumer finance division might take longer than the three years the bank initially forecast.

In its third-quarter trading statement, bad debt charges in the US were $4.2 billion (€3.2 billion) in the period, an increase of 24 per cent over the previous three months, as credit card loans and recent mortgages started to go sour.

HSBC said it was feeling the effects of the economic slowdown in Asia but expected the region would continue to grow. - ( Financial Timesservice)