HSBC’s Asia Pacific chief said riots in Mong Kok during the Lunar New Year did not affect the decision to keep its headquarters in London instead of moving it to Hong
Peter Wong Tung-shun, the Asia-Pacific chief executive of HSBC Holdings, told the South China Morning Post on Monday the decision not to transfer the headquarters to Hong Kong was based on regulatory and business development concerns, and not the riot dubbed the ‘fiashball revolution.’
“Our decision of not moving our headquarters back to Hong Kong has nothing to do with the Mong Kok riot. In fact, UK has (also had) riots recently,” Wong told the Post in a telephone interview.
Wong said the whole idea of studying whether it should move the headquarters to Hong Kong started 10 months ago when the UK implemented increasingly tougher regulations.
“However, after a 10 month study, we found that the regulatory requirements between UK and Hong Kong on the banking sector is similar,” Wong said.
Wong said the business strategy by HSBC of having its headquarters in the UK and the Asia headquarters in Hong Kong has the advantage of facilitating international flows and cross border deal such as ChemChina’s acquisition of Swiss seed company Syngenta, where HSBC is the lead advisor.
“We are very familiar with both the Chinese companies and the European regulation which allow us to capture these cross border transaction,” Wong said.
He said the headquarters issue is now settled and would only be revisited if new material circumstances come up.
The unanimous decision by HSBC’s board on Sunday gives a boost to London’s status as a global financial centre, which has faced challenges from tougher regulation since the financial crisis as well as rising costs.
“London is one of the world’s leading international financial centres and home to a large pool of highly skilled, international talent,” Europe’s biggest bank said in a statement following a meeting in the British capital. “It remains therefore ideally positioned to be the home base for a global financial institution such as HSBC”.
“What is important is the decision would not affect our commitment to Hong Kong, China and Asia which in the past years have contributed to our global business,” Wong said.
Hong Kong Monetary Authority chief executive Norman Chan Tak-lam issued a statement on Monday where he said “the HKMA appreciates that for a large international bank such as HSBC, relocation of domicile is a very major and complicated undertaking. We respect the decision of the Board of HSBC Holdings Plc to maintain the status quo.”
“I would like to stress that Hong Kong is the premier banking and financial hub in Asia, with all but one of the 30 Global Systemically Important Banks operating in Hong Kong. We note that The Hongkong and Shanghai Banking Corporation, which is headquartered in Hong Kong, has all along been the biggest source of profits for the HSBC Group, which will continue to use Hong Kong as the headquarters to grow and develop its business in the Asia Pacific region, including the major business investment plans in the Pearl River Delta.”
The stock market cheered the decision as HSBC Holdings outperformed the Hang Seng in the first half-hour, lifting 3.43 per cent to HK$49.75, investors apparently welcoming the bank’s decision not to engage in a costly relocation and deciding the stock was oversold last week.
“No surprise,” said Hugh Young, managing director of Aberdeen Asset Management Asia Limited, one of the bank’s biggest shareholders.
The decision comes at the end of a tumultuous week for European banks, whose shares have tumbled on fears of a global economic slowdown and the impact on earnings from a prolonged period of low or negative interest rates.
HSBC shares have fallen around 18 per cent since the start of the year and are down more than 30 per cent from last April when the group began the review of where to base its headquarters, hit by China’s flagging economic growth and its ongoing market turmoil.
Investors in HSBC had encouraged the bank to consider leaving Britain, partly because of a tax on banks’ global balance sheets brought in after the 2007-2009 financial crisis.
But in July, Britain scaled back the tax, as part of efforts by finance minister George Osborne to help to keep Britain a “highly attractive” place for banks.
Gyrations in Chinese markets coupled with concerns about China’s increasing influence over Hong Kong and its independent status meant it was seen as increasingly likely in recent months that the bank would stick in London.
HSBC stressed that while it was keeping its UK base, it remained committed to its Asia “Pivot” strategy under which it plans to invest more into China’s Pearl River Delta region and in Southeast Asia.
“Having our headquarters in the UK and our significant business in Asia Pacific delivers the best of both worlds to our stakeholders,” Chief Executive Stuart Gulliver said in the statement.
HSBC, which moved from Hong Kong to London in 1993 when it bought Midland Bank, considered several possible cities to re-base to, including Toronto and Paris. In the later stages of the review, HSBC said it was looking purely at Britain and Hong Kong.
Analysts estimated the cost of moving would be between US$1.5 billion and US$2.5 billion.
HSBC said it will end its policy of reviewing where its headquarters should be every three years, and will only do so if there is “a material change in circumstances.”
With additional reporting by Reuters