HSBC considers moving HQ out of UK
HSBC, Europe's biggest bank, has begun a review of its headquarters to examine where it should be located and whether a move outside of the UK is beneficial, citing the increased regulatory burden. The decision was taken on Thursday at a high level board meeting.
As part of a broad strategic review, the board has asked the management to start working to establish the best location for the headquarters of HSBC, the bank said in a statement issued Friday.
In the statement, the bank also mentions uncertainty over Britain's future membership of the European Union is weighing on its decision making, as well as new rules which oblige banks to split their retail and investment banking activities
After the news, the bank's shares rose 2.6%. Indicating that investors look favorably on the idea of a change in location for the headquarters.
Does HSBC really want to leave the UK?
The review follows plans announced in the recent budget to increase the bank levy from 0.156% to 0.21%. The levy particularly affects banks with large balance sheets, such as HSBC. Last year it paid £750m of the £1.9bn raised by the government through the tax.
HSBC's profits fell 17% in 2014. HSBC blamed its’ "challenging year" on the $2.4bn it was forced to pay in fines and settlements in relation to foreign exchange manipulation and mis-selling of payment protection insurance.
The scandal-hit bank has also faced allegations that it helped people evade UK tax using hidden HSBC accounts in Geneva.
Moreover, Flint (HSBC Director) apologized in his statement on Friday of control failures that allowed undetected and unacceptable behavior, resulting in fines and penalties, referring to the recent Swiss leaks fraud and tax evasion scandal.
Some advantages and disadvantages of the possible HSBC bank move out of London.
Advantages
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Disadvantages
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A reduction less tax evasion
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Job losses within the HSBC group
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There would be an impact on the City and Britain's place as the home of major global banks.
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Canary Wharf would see a reduction in economic activity
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The UK economy would experience a reduction in tax revenues (across bank taxes, the bank employees income, and other bank activities)
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Alternative locations
Despite regulatory change, London is renowned for being a stable centre for financial services.
It has a robust legal system, well developed capital markets which allow large banks like HSBC to fund their activities, and is in a time zone ideal for doing business in America and Asia.
There are also very few markets in the world large enough to handle a global bank with 260,000 employees and a market capitalisation of £118bn.
One option for relocation is New York. But HSBC has had its fair share of problems in America, where it is under a special regulatory regime following findings against it for supporting drug cartel operations in Mexico.
Hong Kong could be another option, but the political risks of moving under the umbrella of China could be legion.
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