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(Corrects figure in 10th paragraph to 7.6 million pounds)
* Former chairman Green says bank's reputation 'sullied'
* Green says 'should have drilled into detail'
* Green says compliance has since improved
* Former Lloyds chair plays down Brown role in HBOS deal
By Matt Scuffham
LONDON, July 14 (Reuters) - HSBC should have madedeeper checks before buying a Swiss private bank that allegedlyallowed customers to dodge taxes and a Mexican business thatbreached anti-money laundering rules, its former chairman said.
"With the benefit of hindsight, it would have been better tohave drilled into the detail much earlier. We didn't geteverything right," Stephen Green told British lawmakers onWednesday.
These scandals have damaged the image of Europe's biggestbank and the reputation of Green, who served as the bank's chiefexecutive between 2003 and 2006 and as its chairman between 2006and 2010. Green and HSBC had managed to come through the 2007-9financial crisis relatively untainted.
"We had that reputation sullied by things we didn't getright in a couple of different places," Green told the House ofLords Economic Affairs Committee, which was conducting a one-offsession on banking culture.
In 2012, HSBC had to pay a record $1.9 billion fine afterU.S. authorities said it had become the preferred financialinstitution for drug traffickers and money launderers between2006 and 2010.
"I'm not going to say we covered ourselves in glory becauseit's not true ... since then they have very substantiallyreinforced the compliance function and it's clear we needed todo that," Green said.
HSBC's Swiss business has been in the spotlight ever since aformer IT employee Herve Falciani fled Geneva in 2008 with fileswhich were alleged to show evidence of tax evasion by itsclients. The bank has admitted past failings in compliance andcontrol at its Swiss bank following the allegations.
Green was also asked how he felt about the high levels ofpay in the banking industry.
"It certainly kept me awake. [There was] no possible way onmoral grounds of justifying it," he told the committee.
The bank's current chief executive Stuart Gulliver, is amongthe highest paid bankers in Europe with a pay packet last yearamounting to 7.6 million pounds ($11.8 million).
Win Bischoff, former chairman of Lloyds Banking Group, was asked by the panel about the rationale behind thebank's acquisition of struggling HBOS in 2008. This acquisition has been blamed for forcing Lloyds to seek a 20.5 billiongovernment bailout.
The bank's then chairman Victor Blank said he had been toldby then-prime minister Gordon Brown that the deal would not besubject to a competition probe but Bischoff said the decisionwas not entirely down to political influence.
"It was not done purely because the prime ministerencouraged the board of the bank (Lloyds). There had beendiscussions that this might suit Lloyds very well," Bischoffsaid.($1 = 0.6418 pounds) (Editing by Sinead Cruise and Jane Merriman)
