March 6 (Bloomberg) -- HSBC Holdings Plc, Europe’s biggest bank, prefers to keep its headquarters in London and said reports of an “imminent change” are speculative, Chairman Douglas Flint and Chief Executive Officer Stuart Gulliver said.
The Sunday Telegraph reported today that the bank was planning to move to Hong Kong because of Britain’s taxes and financial regulation. The U.K. increased a tax on bank balance sheets this year to raise 2.5 billion pounds ($4.1 billion).
“In light of possible regulatory changes and additional costs such as the bank levy,” HSBC is “being increasingly asked by shareholders and investors about the likely additional cost of being headquartered in the U.K.,” Flint and Gulliver said in an e-mailed statement today. “We are very clear that the City of London’s competitive position deserves protection and HSBC will play a full part in this. We are encouraged by the U.K. government’s recent commitments to do the same.”
The Telegraph cited an unidentified representative of a “top institutional investor” as saying a move is “now more than likely.” HSBC has told key investors that its latest full- year earnings have made the case for moving to Hong Kong “overwhelming,” the Telegraph said. HSBC makes most of its pretax profit outside the U.K.
“London continues to be widely recognized as one of the world’s leading international financial centers, a position it has built over many decades through deliberate policy action,” according to the e-mailed statement. “We have been very clear that it is our preference to remain headquartered here.”
‘Too Big to Fail’
Bank of England Governor Mervyn King criticized the banking industry’s focus on short-term profit in an interview with the Daily Telegraph published yesterday.
“Why do banks in general want to pay bonuses?” King said. “It’s because they live in a ‘too big to fail’ world in which the state will bail them out on the downside.” Good businesses “keep a clear vision of who their customers are, and are run by people who don’t think they should simply maximize profits next week,” he said. A Bank of England spokeswoman confirmed the comments.
With banks, “there isn’t that sense of longer-term relationships,” and if it’s possible “to make money out of gullible or unsuspecting customers, particularly institutional customers,” they think “that is perfectly acceptable,” King said. He also criticized the “weight put on the importance and value of takeovers” and the destruction of companies with good reputations for short-term gain, the Telegraph said.
Paying Taxes
HSBC paid 1.2 billion pounds in taxes last year, and the U.K. government may lose as much as 500 million pounds if the bank were to shift its headquarters outside of Britain, the Telegraph reported today.
HSBC will decide whether to keep its headquarters in London this year, Flint said last month.
“Any decision we make will not be based on regulatory arbitrage, it will be based on the economics of where it’s best to do our business,” Flint said. “Were we to relocate, we would not go anywhere where there was a risk to the character of the organization.”
During the 145 years of HSBC’s history, the bank had been in the U.K. for 18 years, Flint said. HSBC moved to London in 1992 from Hong Kong after taking over Midland Bank Plc because to “grow our business as an international bank was not going to be possible from a regional base.” HSBC’s London headquarters building in Canary Wharf has 1.1 million square feet (102,000 square meters) of space.
The U.K. raised the balance-sheet levy because bank stability has improved in recent months, lenders have been given greater time to meet international capital requirements and there is more certainty on regulation, the Treasury said.
--With assistance from Svenja O’Donnell, Thomas Penny and Jon Menon in London. Editors: Stephen Kirkland, Gavin Serkin |
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