HSBC poised for climbdown on threat to leave

The Sunday Times

Aimee Donnellan Published: 7 February 2016

Giant bank set to abandon plans to quit London for Hong Kong after Osborne’s olive branch and turmoil in China

Decision time: Canary Wharf or Hong Kong for HSBC HQ?

Decision time: Canary Wharf or Hong Kong for HSBC HQ? (Getty)

HSBC is expected to decide this week whether to keep its headquarters in Britain, with senior sources saying directors are leaning towards staying put.

A vote to remain would boost George Osborne, who has made a series of concessions to the City in the face of HSBC’s threat to leave.

The bank — Europe’s largest, with 266,000 employees worldwide, and the second-biggest company in the FTSE 100 — said last April that it would examine whether to remain domiciled in the UK. Among its concerns it cited tough regulations, Britain’s levy on bank assets and uncertainties over Brexit.

Hong Kong has been seen as the most likely destination for HSBC, as it was based in the former British colony for more than a century before buying Midland bank in 1992. However, it is thought that political ructions in Hong Kong and the downturn in the Chinese economy have tipped the balance in favour of remaining in the UK.

“My instinct is that they won’t leave,” said Martin Gilbert, founder and chief executive of Aberdeen Asset Management and one of the bank’s largest investors. “It would be quite a logistical manoeuvre to move the operations out of Britain.”

A faction in the HSBC boardroom is understood still to be pushing for a move abroad, according to a source close to the lender. But it is thought that a majority of board members are in favour of staying.

A final decision could be made this week, or at a board meeting the weekend after next, before the release of annual results. It will follow months of intense political lobbying by chairman Douglas Flint and other HSBC board members.

The bank had cited tough new regulations — including the “ring-fence” split between retail and investment banking — and the Brexit referendum as the reasons for the review.

Since then, Osborne has moved to phase out the bank levy — a surcharge on lenders’ loan books. HSBC, which earns 80% of its profits in Asia, had long complained that the charge unfairly penalised banks with large overseas operations. In 2014, HSBC paid the Treasury £750m.

The chancellor has also ousted the City regulator Martin Wheatley and softened the “ring-fence” rules.

The decision over domicile coincides with the publication of a report on how the bank has reformed its internal controls after a record fine in the US three years ago. In late 2012 the bank paid $1.9bn (£1.3bn) to settle allegations that it allowed terrorists and drug dealers to launder cash through HSBC accounts. An American judge has ordered the bank to release, by Friday, a 1,000-page report written by an independent monitor.

Last week the bank also agreed a $470m settlement in a mortgage case. It had been charged with engaging in “unsafe and unsound practices and foreclosure activities”.

HSBC declined to comment.

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