HSBC Could Quit UK, Citing Potential $2.5 Billion Cost From New Regulations

November 9, 2011Investingby EW News Desk Team


UK’s largest bank HSBC Holdings Plc warned yesterday that the company might be forced to leave the country if the Government decides to adopt all the reforms proposed by the Independent Commission on Banking's (ICB) in September this year.

HSBC is said to be furious at certain ICB proposals that would penalise the bank for having more deposits than loans – a measure they claim allows the bank to be more liquid and safe than other UK banks.

According to HSBC’s Chief Executive Stuart Gulliver, the proposal would punish HSBC's prudent balance sheet, which is more than fully funded by customer deposits. If the commission’s proposals were to be implemented as they stand, HSBC would need to sell about $55 billion of loss-absorbing debt at an annual cost of about $2.1 billion. Coupled with a British bank levy that will cost about $400 million a year for its overseas operations, the bank simply had no choice but to consider its options.

"We don't know whether the Government will implement the recommendations in the ICB report as currently configured, so we don't have enough facts to make the decision,” said Gulliver, as cited by The Independent. “We are also saying that the board is acutely aware of its fiduciary duty to its shareholders. We are trying to make those two [facts] quite separate but also somewhat linked."

Gulliver though assured the media that the company was prepared to wait until the end of next year before making its final decision, as they weighed up the legislation based on the ICB’s report.

“This is a non-trivial decision,” said Gulliver, as quoted by Bloomberg. “You don’t move your head office on a regular basis. You need to have all the facts at your disposal and very calmly and very coolly analyze. We don’t have enough information yet to get into that analytical framework.”

Finance Director Iain Mackay added that, “as more facts become available to us then we will clearly act in the best interests of our shareholders and the board of directors will make decisions recognizing those fiduciary responsibilities.”

Hong Kong would “absolutely” welcome HSBC, along with fellow UK bank Standard Chartered, if they decided to move headquarters to the former British territory, said its CEO Donald Tsang in an interview in September.

While HSBC have always had historical roots with Hong Kong since the company was founded in March 1865, its takeover of Midland Bank in 1993 meant that it was legally required to relocate its world headquarters from Hong Kong to London that year.

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