City A.M. has learned that the Hong Kong Monetary Authority (HKMA), whose permission HSBC would need to move back to the city state, has informed the bank that it would be implicitly backed by the Chinese government if it came home.
Doubts had been raised over Hong Kong’s ability to host a bank of HSBC’s size given that the firm’s asset base of $2.7 trillion is more than 13.5 times the size of its economy.
But it is understood that the HKMA has actively sought to reassure HSBC that it does not share the view of some regulators, who have expressed concerns about welcoming the bank back to Asia.
The warm words from Hong Kong clear the way for the bank to flee the UK’s growing regulatory burden if it becomes too onerous.
HSBC is currently conducting a regular review of its domicile in order to determine whether its HQ is in the right place.
It is understood that the bank feels it cannot make a decision until there is a clear outcome from the Independent Commission on Banking’s (ICB) final report, which is published this coming Monday.
That means it will have to wait until the Treasury draws up legislation to implement the ICB’s proposals, with concerns centered on whether chancellor George Osborne will require banks to put a ringfence around their UK retail operations.
Losing one of the world’s biggest banks would be a major blow for Osborne, but he has already committed to putting in place some kind of ringfence requirement.
In May, Martin Wheatley, the outgoing head of the Hong Kong Securities and Futures Commission (SFC), told City A.M. that he would have serious doubts about being lead regulator to HSBC, given its size. The lead regulator would usually be expected to organise a rescue or inject liquidity for its banks if required.
But Wheatley has now left his job in Hong Kong to take up a new role at the FSA, and the HKMA has ultimate authority over the SFC.
Relations between HSBC and Beijing have become increasingly cordial as the bank has sought and gained permission to grow its Chinese business. In July, HSBC became the first foreign bank to become a member of the Shanghai Futures Exchange, giving it access to China’s gold futures market.
HSBC declined to comment on the news.