THE VICKERS report is the single biggest factor making the UK a less attractive financial centre than it was in the past, according to HSBC chairman Douglas Flint.
Appearing before a committee of MPs, Flint said that the bank’s $2.1bn (£1.35bn) estimate of the annual costs from one single measure in the Vickers report would “in today’s conditions be a great deal more and would be a very significant item to weigh up in the consideration as to where one would… choose as the optimal place for one’s headquarters”.
The cost, he said, is “too high to ignore”, but asked if he was trying to blackmail the UK, he added: “It’s not intended to be a gun to the head. It’s a very big number.”
Flint was criticising Vickers’ proposal that banks be required to issue billions in bail-in bonds – debt that can be written down in the event of their collapse.
Because HSBC is mostly deposit-funded, the rule would force the bank to issue debt it does not need, increasing its reliance on wholesale funding.
Flint said he felt singled-out by the proposal: “It seems perverse, in a way, that a business model that is very conservatively structured in funding, ie funded by deposits, would be disadvantaged by a measure that is designed to strengthen the system,” he argued.
As City A.M. revealed yesterday, the Treasury is considering dropping the requirement for the non-ring-fenced parts of banks, which would massively reduce the cost to HSBC.
RBS chief executive Stephen Hester, who was also answering questions from MPs, said that he had “extremely low” certainty on the cost. He also conceded RBS could be forced to sell its investment bank at some point in the future, but not due to Vickers.
Separately, Tory MEP Kay Swinburne wrote today that Vickers risks “moving alone” on regulations that are already being brought in internationally. “The UK cannot operate as though it is in a vacuum,” she wrote.