Just last week UBS Chief Executive Oswald Grübel gave a good lashing to the government warning that banks are tired of being criticized and the regulations being forced on them may soon make them look to where regulations are less strict such as Hong Kong or the US. Now HSBC has a warning that it could be moving if government does not step back on its regulations and levying higher taxes against banks.
Rumors have been swirling that a move is being considered to take it away from London. Hong Kong would be the most likely location. The bank was in Hong Kong almost 2 decades ago before moving to London. Also HSBC’s chief executive’s main office is located in Hong Kong.
Should banks pull up their main base from London it would lower London’s power as a financial centre. Jobs would be lost as would substantial taxes for the government. This would definitely cut into the recovery and fix of the UK budget. Last year HSBC alone paid £1.2billion in taxes.
The Bank of England’s Governor Mervyn King has been very vocal in stating that he believes banks should forego high paid cash bonuses and that banks care less of their customers than they should. He has been calling on regulations to be strict on bonuses and considered splitting the banks investment arm apart from the retail banking division. He believes that without change the banks will run into another financial crisis if they are allowed to revert to practices of the past. Recently Mr. King gave an interview in which he criticized the bank’s concern of their customers and said: “If it’s possible to make money out of gullible or unsuspecting customers, that’s perfectly acceptable”.
Rumors started to rise that share holders are questioning whether HSBC should stay sit where they will be required to pay out a higher tax and deal with further regulation tightening. It should be noted that HSBC did not require a taxpayer bailout to survive through the financial crisis. Do to that they have been vocal about across the board criticism of banks and forced regulations. However HSBC played down the reports that surfaced over the weekend of a move to Hong Kong.
A joint statement was released by both HSBC’s chief executive Stuart Gulliver and chairman Douglas Flint saying: “Talk of imminent change in HSBC’s position on this matter is entirely speculative and presumptuous.
“London continues to be widely recognised as one of the world’s leading international financial centres, a position it has built over many decades through deliberate policy action. We have been very clear that it is our preference to remain headquartered here.”
“We are however, in light of possible regulatory changes and additional costs such as the bank levy, being increasingly asked by shareholders and investors about the likely additional cost of being headquartered in the UK.
“We are very clear that the City of London’s competitive position deserves protection and HSBC will play a full part in this; we are encouraged by the UK government’s recent commitments to do the same.”
HSBC and the Government have differed on opinion on the tax levy, with the bank saying the levy is unfair and penalizes those with large overseas operations. It is estimated that HSBC’s profits are 90 per cent from outside of the UK.
The HM Treasury released a general statement aimed at all banks through a spokesman saying: “While we are determined that the UK remains a world-leading financial centre, banks must pay their fair share of deficit reduction, which is why the government has introduced a permanent bank levy raising £2.5bn a year.”
Shareholders made statements to the Sunday Telegraph and one shareholder pointed out the bottom line effect with a move to Hong Kong saying: “Instinctively we were very surprised by the change of tone. But you can’t argue with the numbers. Moving to Hong Kong could deliver a 30% premium [to the share price] overnight.”
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