HSBC: Vickers cost too high to stay in UK

HSBC will leave London if there are not substantial changes to the policies proposed by the Vickers Commission, its chief financial officer Iain Mackay said yesterday.

Speaking during the bank’s third-quarter results presentation, Mackay said that Vickers’ demand that bank issue billions in senior unsecured debt in order to absorb losses if it fails would cost HSBC $2.1bn (£1.32bn) a year in addition to the $400m cost of the UK’s bank balance sheet levy.

“We would probably view that cost as being too high,” he said. The treasury is still working out the details however, many of which are incompatible with EU law.

In September, City A.M. revealed both that Hong Kong is courting HSBC to get the bank to redomicile to Asia and that the ICB’s capital proposals were causing concern to banks like HSBC and Standard Chartered, which fund themselves mainly out of deposits and have not sold enough bonds to fulfill the ICB requirements. HSBC has a loan-to-deposit ratio of 76 per cent.

Despite its regulatory worries, the bank reported a more-than-doubling in quarterly pre-tax profit to $7.16bn yesterday. Impairment costs rose by $700m, however, driven by its US business, and its cost-to-income ratio crept up to 62.7 per cent.