HSBC says bank rescue sets bad precedent

By Alexandra Hudson

ISTANBUL (Reuters) - The chief executive of HSBC, Europe's biggest bank, said a rescue plan for British banks unveiled on Wednesday set a dangerous precedent but the government had little choice.

"I sympathise with the British taxpayer. I don't think it is right that the British taxpayer should need to bail out banks ... it sets a bad precedent, but the government had no alternative," Chief Executive Michael Geoghegan told Reuters in an interview in Istanbul.

Geoghegan said he expected "light at the end of the tunnel" of the credit crisis by 2010 or 2011. He said it was too early for HSBC to look at acquisitions, but its shareholders had indicated they would be willing to raise capital if it did so.

His comments came after Britain pledged 50 billion pounds to boost capital in its banks, followed hours later by a coordinated interest rate cut by the world's major central banks in an attempt to revive the global economy.

Geoghegan, who was on a global roadshow, said many countries were already in recession and it was the developed world which would feel the impact of the crisis first.

"Some form of recession is inevitable... and it has to be quite severe to get confidence back into the market."

"The depth of this recession will depend to a large extent on the actions of governments. Asia will slow, but is by no means already in recession," he added.

"I am concerned about inflation, I am not convinced inflation is dead," he said, but he added the current turmoil was no repeat of the Great Depression.  Continued...