HSBC has decided to keep its headquarters in Britain. The unanimous decision by the board of Europe's biggest bank rejected the idea of shifting to Hong Kong.
HSBC has decided to keep its headquarters in Britain, rejecting the option of shifting back to Hong Kong, its main profit-generating hub.
That follows a 10-month review by the banking group.
The unanimous decision by the board of Europe’s biggest bank gives a boost to London’s status as a global financial centre.
— HSBC (@HSBC) February 14, 2016
That has been under threat because of tougher regulations and rising costs.
Chief Executive Stuart Gulliver did though warn the decision would be reconsidered if Britain voted to leave the European Union in a promised referendum.
No threat to UK government over levy
Some investors had encouraged HSBC to consider moving its HQ from Britain, partly because of a tax on banks’ global balance sheets in response to the financial crisis.
But following extensive lobbying by the banking industry, British finance minister George Osborne said in July he would halve the levy and, crucially for HSBC, no longer apply it to the overseas assets of British banks, part of efforts to help to keep Britain an attractive place for banks.
The bank denied using the threat of moving to force the British government to rein in the tax.
“We had no negotiation with the government,” HSBC Chairman Douglas Flint told BBC radio on Monday. “The government was very well aware of our view … but there certainly was no pressure put on, or no negotiation.”
The waiver on applying the levy to HSBC’s overseas assets will only come fully into effect in 2021 at the earliest.
Asked if the government had caved in to threats by the banks, a spokeswoman for Prime Minister David Cameron said Osborne’s budget last year had set out that the levy was introduced to raise revenue and stabilise bank balance sheets. “It served its purpose, it worked but it risks doing harm if left unchanged, he (Osborne) said that clearly last summer.”
No eastern promise
For Hong Kong, the chance of luring back HSBC – short for Hongkong and Shanghai Banking Corporation – to its birthplace and to the heart of its Asian growth strategy has been lost for now.
“London is one of the world’s leading international financial centres and home to a large pool of highly skilled, international talent,” HSBC said in a statement. “It remains therefore ideally positioned to be the home base for a global financial institution such as HSBC.”
Analysts estimated the cost of moving out of London at between $1.5 billion (1.34 billion euros) and $2.5 billion (2.23 billion euros), a hefty bill to swallow unless HSBC was able to achieve clear tax and regulatory advantages.
Hong Kong, where HSBC was founded about 150 years ago and where it employs more than 20,000 people, was considered the strongest relocation option as it accounts for 46 percent of HSBC’s pretax profit.
But gyrations in Chinese markets coupled with concerns about China’s growing influence over Hong Kong had helped make it more likely the bank would stick to London.