HSBC Resolution re Princeton

HSBC Holdings PLC
17 December 2001

               HSBC REACHES RESOLUTION IN PRINCETON NOTE MATTER

HSBC USA Inc. announced today that it has settled civil law suits brought by
51 of the 53 Japanese plaintiffs who have asserted claims arising from the
involvement of its subsidiary, Republic New York Securities Corporation
('RNYSC'), in the Princeton Note matter. It has also resolved all of the
previously-reported regulatory and criminal investigations arising from the
Princeton Note Matter. The civil and criminal resolutions are subject to court
approval, which is expected in the next few weeks. The regulatory settlements,
with the Securities and Exchange Commission ('SEC') and the Commodity Futures
Trading Commission ('CFTC'), are effective immediately. The cost of the
resolution was reflected in provisions HSBC USA Inc. has previously taken and
reported, and the after tax cost is within the range of the price reduction
taken by companies controlled by the late Mr. Edmond Safra at the time of the
HSBC acquisition of Republic New York Corporation. The Princeton Note Matter
came to light prior to HSBC's acquisition of Republic New York Corporation,
RNYSC's parent, in December, 1999.

As part of the resolution, RNYSC, now a dormant subsidiary, plead guilty today
in federal court in Manhattan to two federal criminal charges arising from the
misconduct of certain of its former executives in assisting Martin Armstrong's
scheme to defraud numerous purchasers of Princeton Notes, which Armstrong
offered for sale in Japan. Following the acquisition by HSBC, RNYSC ceased
active business during the year 2000, and the employment of all the RNYSC
executives associated with RNYSC's misconduct was terminated in 1999.

HSBC USA Inc.'s president and chief executive officer, Youssef A Nasr,
commented: 'We are pleased that today's settlement will put the Princeton Note
Matter largely behind us. HSBC commends the decision of the U.S. Attorney's
Office in Manhattan, the SEC and the CFTC to focus the outcome of the criminal
and regulatory proceedings on providing compensation to the noteholders rather
than seeking substantial fines or penalties. As a result, we have been able to
bring to a prompt conclusion almost all of the civil litigation arising from
the Princeton Note Matter, which otherwise was likely to take far longer to
resolve. The prompt resolution of these complicated circumstances is a great
achievement that follows from Republic's and HSBC's commitment to cooperate
fully with the Government.'

The United States Attorney's Office in its public filing acknowledged HSBC's
'exemplary cooperation' and has recommended to the Court that no criminal fine
be imposed on RNYSC. Instead, RNYSC has agreed to the imposition of a
restitution order requiring it to make payments totalling approximately $606
million to Princeton noteholders, as compensation for their out-of-pocket
losses. Since RNYSC's capital is about $81 million, HSBC USA Inc. has agreed
to pay the remaining amount of compensation due to the noteholders in exchange
for their termination of the pending civil litigation against HSBC USA Inc.
and RNYSC, and in connection with the United States Attorney's Office
commitment not to pursue any claims against RNYSC's parent company or its
banking affiliate. In addition, the settling Princeton noteholders can expect
to receive payments totalling approximately $72 million from assets held by
Princeton's court- appointed receiver.

If the court imposes the sentence agreed to by RNYSC and the U.S. Attorney's
Office and approves a related settlement between HSBC and the Princeton
receiver, 17 lawsuits filed in the federal court in Manhattan by 51 Princeton
noteholders against HSBC USA Inc., RNYSC and others will be settled,
terminating the plaintiffs' claims for damages arising from unpaid Princeton
Notes with face amounts totalling approximately $1 billion. As part of the
resolution of the criminal case, RNYSC has also reached, or expects to reach,
settlements with seven additional Princeton noteholders who have not filed
suit.

As previously disclosed, the after tax cost to date of the settlement is
within the range of the price reduction taken by Republic's largest
stockholders, companies controlled by the late Mr. Edmond Safra, at the time
of HSBC's acquisition of Republic in December, 1999. Two of the noteholders,
whose civil suits seek damages arising from unpaid Princeton Notes with face
amounts totalling approximately $125 million, are not included in the
settlement and their civil suits will continue.

The Government excluded one of them from its proposed restitution order
because it is being criminally prosecuted in Japan for its conduct relating to
its Princeton Notes, and excluded the other because the sum it is likely to
recover from the Princeton Receiver exceeds its insubstantial losses as
calculated by the Government.

Under the regulatory settlements RNYSC agreed with the SEC to the revocation
of its broker-dealer registration and with the CFTC to the revocation of
various commodities-related licenses and the payment of a $5 million civil
monetary penalty.