London: Banking group HSBC Holdings has decided to keep its headquarters in Britain, rejecting the option of shifting its centre of gravity back to main profit-generating hub Hong Kong after a 10-month review.
The decision by HSBC’s board, which Europe’s biggest bank said was unanimous, gives a boost to London’s status as a global financial centre, under threat since the financial crisis of 2007-09 from tougher regulation and rising costs.
Yet chief executive Stuart Gulliver immediately warned that the bank could not stick with the status quo were Britain to vote in favour of leaving the European Union in a promised referendum, saying it would consider moving around 1,000 employees from London to Paris.
Some investors had encouraged HSBC to consider moving its headquarters from Britain, partly because of a tax on banks’ global balance sheets brought in after the financial crisis which had cost it $1.1 billion in 2014.
But following extensive lobbying by the banking industry, British finance minister George Osborne said in July he would halve the levy and, crucially for HSBC, no longer apply it to the overseas assets of British banks, part of efforts to help to keep Britain an attractive place for banks.
The bank denied using the threat of moving to force the British government to rein in the tax.
“We had no negotiation with the government,” HSBC Chairman Douglas Flint told BBC radio yesterday. “The government was very well aware of our view ... but there certainly was no pressure put on, or no negotiation”.
The waiver on applying the levy to HSBC’s overseas assets will only come fully into effect in 2021 at the earliest, leaving the bank exposed to shifting political winds in Britain in the interim, said Investec analyst Ian Gordon in a research note, who nonetheless kept a “buy” rating on its shares.
Asked if the government had caved in to threats by the banks, a spokeswoman for Prime Minister David Cameron said Osborne’s budget last year had set out that the levy was introduced to raise revenue and stabilise bank balance sheets. “It served its purpose, it worked but it risks doing harm if left unchanged, he (Osborne) said that clearly last summer.” A Reuters analysis showed that moving to Hong Kong might have actually increased the bank’s tax burden.
“Arguably, a more benign approach in the UK to the regulation of banks, and a less aggressive tone by politicians, also played an important part in the decision,” said Guy de Blonay, a fund manager at Jupiter Asset Management which holds shares in HSBC. The decision to stay in London comes after a tumultuous period for European banks.
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