Bank of England deputy governor says it’s ‘entirely natural’ for HSBC to consider moving its headquarters out of Britain
‘It is entirely natural that as an institution your shareholders should demand that you do this assessment. As a private organisation they should do it,’ he added.
HSBC moved its base from Hong Kong to the UK in 1993 when it bought Midland Bank but last month HSBC chairman Douglas Flint said the board has launched a review into possibly moving its headquarters out of the UK.
Flint said at the time: ‘We are saying: If you had a plain piece of paper and a business of this shape and range where would you go?’
One reason for the bank to consider moving is a hike in a special tax which is levied on banks based in the UK which is making it increasingly costly for them to do business here.
The other major reason are new measures which mean banks have to separate their ‘core’ retail and business banking arms from their corporate and investment divisions by the beginning of 2019.
To comply with this HSBC must set up firewalls around its retail bank by 2019. This would include basic savings and mortgage business in the ring-fenced unit and exclude other areas like complex derivatives.
Moving away: HSBC chairman Douglas Flint said last month that the bank’s board has launched a review into possibly moving its headquarters out of the UK
Mr Bailey today admitted that some banks will get waivers on aspects of the ring fencing but warned that these will be few and far between.
Part taxpayer-owned Lloyds Banking Group is one that wants to be exempt from having separate boards for the two arms because more than 90 per cent of the operations will sit in the ring-fenced business.
The BoE deputy governor said: ‘That would be a good example.’
But, he added: ‘You can’t go showering waivers around in disrespect of the policy, but we will use waivers to achieve sensible ends that are consistent with the policy to get the right outcomes.’
Banks say meeting the 2019 deadline will be difficult as they must set up separate IT functions and operational systems, and are awaiting the Prudential Regulation Authority to finalise the rules.
Mr Bailey added: ‘The timetable is tight, there’s no question about that.’
Banks are also grappling with new EU rules that are designed to regulate bonuses in the industry.
Mr Bailey said institutions must change some pay deals to adhere to the controversial cap, which limits bonuses to no more than twice a person’s fixed salary and bans the use of ‘allowances’ to top up pay above this level.
When HSBC first said it was considering moving its headquarters, its shares rose 2 per cent, despite the expense and regulatory headaches that such a major redomicile would create.
Today its shares on the FTSE 100 index were up 5.2p at 622.8p.
But some investors have been cautious about the noises regarding a move as it is not the first time HSBC has threatened to leave.
In 2010 chief executive Stuart Gulliver said he was so ‘genuinely concerned’ about incoming regulation and was considering moving its headquarters.
And in 2011 HSBC told its biggest shareholders that it was ‘more likely than not’ it would head to Hong Kong.