LONDON – Britain’s biggest bank is staying put.
HSBC Holdings plc said it will keep its headquarters in London, ending a 10-month process in which one of the world’s largest financial companies considered moving to Hong Kong to get closer to its centre of gravity in fast-growing Asian economies.
“I think we’ve ended up with the best of both worlds,” HSBC chairman Douglas Flint told the BBC on Monday. “A pivot to Asia, led from London.”
Flint said that HSBC was, at its heart, a bank focused on trade and investment flows. Sidestepping concerns about the recent volatility in Asian markets, Flint said it had been a privilege to choose between two of the world’s great financial centres and that the decision was not based on short-term market dynamics.
“The U.K. is one of the most globally connected economies in the world with a fantastic regulatory system and legal system and immense experience in dealing with international affairs,” he said.
The bank launched the review last April in light of regulatory and tax changes implemented by the U.K. after the 2008 financial crisis. Particularly problematic was a 2010 tax on a bank’s global balance sheet, which penalized those with global operations such as HSBC and Standard Chartered. Fears that Britain would vote to leave the European Union also heightened concerns.
HSBC’s decision was a relief to the government, which feared losing a pillar of Britain’s financial world — and the signal it would send more broadly for the economy at a time of heated debate about whether or not to leave the EU. The thought of losing one of London’s financial icons had sent the government into panic.
“It’s a vote of confidence in the government’s economic plan, and a boost to our goal of making the U.K. a great place to do more business with China and the rest of Asia,” the Treasury said in a statement after HSBC’s decision.
Campaigners who want the country to leave the EU argued the decision proved that big financial institutions would not be frightened off by a leave vote. But Flint told the BBC that the bank has the ability to move people from London to Paris if necessary for the bank’s wholesale operations.
Investec banking expert Ian Gordon, who thought a move was in the bank’s interest, suggested it was dangerous to trust political promises that won’t be enacted until after the next election. Concerns about slowing economic growth in China and market volatility around the world may have persuaded HSBC to stay with the status quo, Gordon said.
“I’m sure that a perception of market and political volatility would have been a consideration against moving,” he said.
The bank’s decision came after a complicated process that took longer than expected, but speculation increased in the days before the company was set to report its earnings Feb. 22.
HSBC still believes its commercial future lies in the growing wealth of Asia. Almost two-thirds of the bank’s pretax profit came from Asia in the first nine months of 2015, compared with 19 per cent from Europe.
It has offices in 72 countries and territories in Asia, Europe, the Americas, the Middle East and North Africa. It claimed assets of $2.5 trillion as of September.
Many Western banks are interested in expanding operations in Asia, but HSBC has the advantage of already having a major presence there. Founded in Hong Kong in 1865, when the city was a British colony, the bank financed growing trade between China and Europe and was originally known as the Hongkong and Shanghai Banking Corp.
The company moved its headquarters to London in 1992 to meet the regulatory requirements for its acquisition of Midland Bank.