The decision by Europe’s largest bank, HSBC, to remain headquartered in the UK following an internal review is seen as reflective of the government’s easing of the heavy regulatory burden in recent years, as much as it is of a toughening of economic conditions in Asia.
The bank confirmed the “unanimous” decision by its board of directors late on Sunday, after narrowing it down to two possible locations – the UK and Hong Kong.
“As we evaluated jurisdictions against the specified criteria, it became clear that the combination of our strategic focus on Asia, as well as 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,” said Chairman Douglas Flint.
The bank added that it was dropping its previous practice of conducting a review of the location of its headquarters every three years, and would only do so should there be a “material change in circumstances”.
Govt talks tough The move will come as a relief to the British government, which has put huge weight on protecting London’s status as a global financial hub. It is certainly reflective of the sharp change in tone adopted by the Conservative government, since returning to power unencumbered by their coalition partner Liberal Democrats last year.
Pressure on the government had been high since April last year when HSBC formally launched the review – pointing to the toughening regulatory landscape, and high regulatory costs in the UK, added to the uncertainty over UK’s membership of the EU.
Since that time, however, the British government has brought in a number of significant changes deemed seen as favourable to the industry. The decision by the government, in July last year, not to renew the contract of the then head of the Financial Conduct Authority Martin Wheatley – highly unpopular within the banking industry for his tough stance, eagerness for reform, and cracking down on misconduct – which prompted his immediate resignation, was seen as a welcome move from the banking sector’s perspective.
Reduction in banking levy Chancellor George Osborne also signalled the change in approach after announcing a reduction in the banking levy – applied on banks’ balance sheets in the wake of the 2007 financial crisis – which would only apply to UK operations.
The levy had been flagged by HSBC as an example of the high regulatory costs of being based in the UK. In December, the FCA announced it would be dropping an inquiry into the culture as well as pay levels in banks.