Banking

HSBC may relocate to HK

By Rosalba O'Brien and Keith Weir (China Daily)
Updated: 2011-03-08 13:56

A man and a woman pass by the HSBC Holdings Plc building in Hong Kong, which may become the future headquarters of the bank, following the introduction of a potential tax hike on bank assets in the United Kingdom.?[Photo / Bloomberg]

New regulations and asset tax could prompt bank to move headquarters

LONDON - Europe's biggest bank HSBC Holdings Plc may be planning to move its headquarters from London to Hong Kong.

The relocation may come because of what the bank sees as high levels of tax and red tape in the United Kingdom, according to a report in the Sunday Telegraph.

The newspaper quoted unnamed investors who said they understood a move was "more than likely" and that there had been a "change of tone" as HSBC reviews its place of residence, something the bank does every three years.

However, the bank maintained that it preferred to remain in the UK and said talk of an imminent change in its position was "entirely speculative and presumptuous".

"We are, however, in light of possible regulatory changes and additional costs such as the bank levy, being increasingly asked by shareholders and investors about the likely additional cost of being headquartered in the UK," said Chairman Douglas Flint and CEO Stuart Gulliver in a joint statement on Sunday.

A British tax on bank assets to be introduced this year would cost HSBC about $600 million based on its balance sheet at the end of December. That marks a cost for being based in the country, HSBC said last week as it cut its profitability targets alongside its 2010 results.

Related readings:  HSBC net profit more than doubles  HSBC plans to expand more in Chinese mainland  HSBC says CEO's main office to remain in the city  HSBC offers RMB settlement deals in India

Political rhetoric in the UK has become more aggressive towards banks, as public anger has risen at the cost of the taxpayer bailout of lenders Royal Bank of Scotland Group Plc and Lloyds TSB Bank Plc and the payment of generous bonuses to bankers.

Bankers hit back after the Bank of England Governor Mervyn King gave an outspoken interview in Saturday's Daily Telegraph, in which he said the banking industry needed urgent reform and that there was a risk of a fresh financial crisis.

But the UK's finance minister, George Osborne, defended King, telling Sky News on Sunday, "I wouldn't be (putting King in charge of bank regulation) if I didn't broadly agree with his concerns. I'm also very particularly looking at the issue, which he correctly raises, which is how do we deal with the 'too important to fail' problem."

The system of regulation had completely failed, Osborne said.

The Sunday Telegraph also said that the publication of a report into the collapse of RBS's in 2008 by the regulator, the Financial Services Authority, was likely to be delayed from this month until at least April.

Reuters