15th Feb 2016 06:46
LONDON (Alliance News) - HSBC Holdings PLC late Sunday said its board decided unanimously that its headquarters will remain in London, extending a stay stretching back to 1992, when it acquired the UK's Midland Bank and then moved its head office from Hong Kong, where it had been founded in 1865.
The banking giant's threat to leave its Canary Wharf headquarters came in April 2015, when a review was first confirmed at its annual meeting of shareholders. The later stages of the review pitted the group's home markets of the UK and Hong Kong against one another, the bank said, with London's victory confirming the capital's importance as an international financial hub.
"As we evaluated jurisdictions against the specified criteria, it became clear that the combination of our strategic focus on Asia and maintaining our hub in one of the world's leading international financial centres, London, was not only compatible, but offered the best outcome for our customers and shareholders," Chairman Douglas Flint said in a statement.
That a review was called in the first place was partly because of concerns about the political and regulatory environment in the UK. For instance, the country's bank levy cost HSBC USD1.1 billion in 2014.
The levy, implemented in 2011 in an effort to discourage risky activity in the wake of the banking crisis of 2007-09, applies to HSBC's global balance sheet, a cost not imposed on local rivals in the bank's Asian heartland. HSBC, unlike global rivals such as Royal Bank of Scotland Group PLC, required no state rescue during the crisis.
As part of a "new settlement" with the financial services industry, UK Chancellor of the Exchequer George Osborne stated his intent to gradually reduce the bank levy over time, while Martin Wheatley, who would later regret pledging to "shoot first and ask questions later", was ousted as the chief executive of UK regulator the Financial Conduct Authority in July 2015.
Osborne can now celebrate the fact that UK will continue to play host to a global systematically important bank, even amid the uncertainty cast by a looming referendum on whether the country will remain a member of the European Union.
"They've looked carefully and dispassionately at the facts and confirmed that the UK is the best place to base a global business. It's a vote of confidence in the government's economic plan, and a boost to our goal of making the UK a great place to do more business with China and the rest of Asia," a spokesperson for the UK Treasury said.
Also welcoming the decision, Carolyn Fairbairn, director-general of the Confederation of British Industry, a business lobby group, said the review was a reminder of the need for the UK to "stay competitive on regulation, tax and talent".
Tax systems, government policy and regulations were three of 11 criteria identified as part of the domicile review at HSBC's investor update in June 2015, along with others such as economic importance and long-term stability.
Chief Executive Stuart Gulliver was keen to emphasise that there is more to be done if the bank is to achieve the remaining nine goals set out at that investor update. "My colleagues and I remain totally focused on completing the other nine actions," Gulliver said.
That means HSBC's annual results for 2016, due to be published on Monday next week, will be closely watched for signs of progress towards completing those objectives by 2017.
In November, Gulliver said HSBC was nearly 30% of the way towards reducing risk-weighted assets by USD290 billion by that point, a critical piece of the plan, while measures to reduce costs by between USD4.5 billion and USD5.0 billion were beginning to take effect.
On Sunday, HSBC backed the UK to be the "leading western financial centre" supporting the internationalisation of the renminbi, another critical component of the group's strategy. Indeed, last year's investor update detailed plans to increase revenue from the growing use of the Chinese currency to between USD2.0 billion and USD2.5 billion in 2017 from USD1.7 billion in 2014.
The UK's efforts to grow trade and investment flows with China, together with cooperation between the two countries on financing of infrastructure and green bonds, helped the bank to make up its mind on the domicile question. The past year has seen also a continued slowdown of economic growth in China, as well as concerns about the way the country governs Hong Kong.
Asia remains the key growth opportunity for the group, even if the UK is to be its headquarters for years to come.
"Having our headquarters in the UK and our significant business in Asia Pacific delivers the best of both worlds to our stakeholders," Gulliver said.
So much so that HSBC would rather not revisit the matter any time soon, barring a "material change" in circumstances. The board has decided that it is "not necessary" to continue with its previous practice of reviewing its domicile every three years.
By Samuel Agini; [email protected]; @samuelagini
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