Hong Kong: UK banks welcome

BRITISH banks looking to move abroad would be welcome in Hong Kong, the country’s chief executive Donald Tsang said yesterday.

Tsang said that he would “absolutely” be happy to see HSBC and Standard Chartered move their headquarters from the City.

“If HSBC or Standard Chartered were to change headquarters it would not undermine their business at all,” he told Bloomberg. “They already have a healthy line of business in Asia,” he said, speaking during a trip to London to promote the city-state as a financial centre.

Tsang’s comments are the first public signal that Hong Kong is stepping up its charm offensive to UK banks, after City A.M. revealed last week that the Hong Kong Monetary Authority (HKMA) has privately offered a home to HSBC should it decide to leave London.

The bank is currently conducting a review of its domicile, a process that will conclude only after the Treasury has drawn up legislation to implement the proposals of the Independent Commission on Banking (ICB), which released its final report on Monday.

Analysts suggested yesterday that the ICB’s proposals could drive the UK’s banks abroad. UBS bank analysts Alastair Ryan and John-Paul Crutchley say that for HSBC, the ICB report adds to the “continuing cost of being in the old world”.

“We believe the company’s confidence in the stability, predictability and proportionality of UK regulation and taxation have been fundamentally shaken in recent months,” they wrote in a note to investors.

“The UK would be a poorer place without the [HSBC] group, but its shareholders may welcome a move to somewhere better able to calibrate necessary regulation.”

Tsang also commented on the ICB report, comparing it to the US’s Glass-Steagall break-up of banks in the 1930s: “Whatever the measures, you have to look at the viability and we are no longer in the 1930s,” he said.

If a major financial group were to move its headquarters out of London, chancellor George Osborne could have trouble convincing investors that the City is still open for business.

More broadly, UBS’s analysts predict that the ICB report will cause UK banks “to shrink or relocate”, suggesting that Barclays could spin off its investment bank Barclays Capital into a separate entity based in New York.

JP Morgan analysts estimated that the Commission’s proposals will hit Barclays hardest, suggesting that its 2014 earnings could be slashed by nearly a third, compared to a 24 per cent hit for RBS and 21 per cent for Lloyds.

But Barclays chief executive Bob Diamond said yesterday that the report “represents a welcome step towards the greater clarity that banks need to be able to operate with confidence”.

HSBC and Standard Chartered declined to comment. A spokesman for Barclays reiterated its commitment to London and the Treasury did not respond to a request for comment.