HSBC announced recently that it was considering moving its headquarters outside of the UK in response to a growing wave of regulations in the City. If HSBC follows through on its threat, it will likely relocate to Hong Kong – the bank’s natural home. But this revelation has sparked fears that London might lose its position as a global financial centre, while Hong Kong may not be prepared for the bank’s return.
Accommodation concernsIn her blog for
Barron’s Asia, Shuli Ren asks whether Hong Kong can accommodate such a move – and she’s not so sure.
“It is easier said than done, because HSBC is gigantic,” Ren says. The bank’s assets are expected to reach $2.8trn this year, she adds, which is the size of the British economy and nine times Hong Kong’s GDP.
She also points to the Hong Kong Monetary Authority’s (HKMA’s) reaction to the news. In a statement, the regulator welcomed the move, citing the bank’s “deep historical ties to the city”.
But Ren is uncertain about HKMA’s ability to act as the primary regulator for the world’s third-largest bank. “Does the HKMA have the regulatory capacity to host such a big bank?” she asks. “That remains to be seen.”
Barron’s Asia blog
$2.8trn
HSBC’s anticipated global assets for this year, which are nine times the size of Hong Kong’s GDP
Regulatory challengesReuters’ Michelle Price and Lawrence White share these concerns, saying that regulatory experts fear a move would present “major challenges” for the HKMA.
Like Ren, Price and White highlight that the HKMA has never been the primary regulator of a global financial institution on this scale. In order to cope with the added responsibility, the regulator would have to significantly scale up its operations, they add.
But the article also includes comment from an HKMA spokesperson, which provides a counter-argument. “The size of HSBC relative to Hong Kong's economy should not be a cause for concern because international regulators are devising rules for resolving bank failures without using public funds,” said the spokesman.
Reuters story
Calamity for the CityMeanwhile,
The Guardian’s Sean Farrell considers the possible impact on Britain – particularly the City – if the banking giant were to relocate overseas.
According to its annual report, HSBC currently employs 48,000 people in the UK, with approximately 8,500 of these based at the bank’s headquarters in Canary Wharf, writes Farrell – many of whom would be lost if the bank were to move.
But what’s more concerning, he argues, is the potential reputational damage to Britain’s image as a “big player in international finance”.
Having interviewed an academic on the subject, Farrell suggests the move would “deal the country a psychological as well as financial blow”.
“Peter Hahn, a lecturer in finance at Cass Business School, said there would be a big effect on the City’s standing and also on the wider economy if HSBC left,” he notes.
Hahn said: “There would be a huge psychological effect. In HSBC leaving London, you would start to wonder how long they would want to hold on to their UK bank.”
The Guardian comment
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