Hard not to gloat over HSBC’s litany of troubles
I experienced a tortuous relationship with this haughty and unhelpful bank; ending when HSBC took action that threatened the very survival of my business
Schadenfreude or drawing comfort from the discomfort of others is hardly the most edifying of emotions however it would take herculean restraint for me not to revel in HSBC’s recent traumas.
Over at the Hong Kong Monetary Authority, it is more a case of credulity rather than revelling, as it appears to be blundering into the gamesmanship of HSBC’s directors who are threatening to move their headquarters out of London and back to Hong Kong.
Like many HSBC customers, or in my case ex-customers, I experienced a tortuous relationship with this haughty and unhelpful bank; ending when HSBC took action that threatened the very survival of my business. Only after switching banks did I come to realise just how badly I had been served for far too many years.
It is not hard to find others eager to swap HSBC horror stories, however it is one thing for individuals to be screwed but quite another to witness how the bank collectively screwed Hong Kong when it upped sticks and rebased itself in London back in 1993.
This was a sensitive time for Hong Kong but HSBC displayed little concern for the impact its exit would produce on the place where its fortune was created.
Yet Hong Kong did not retaliate; the bank retained its considerable business with the government, remained as a note issuer and its directors continued having access in the highest places.
Now it is under fire in London for the way it has behaved, including helping its customers avoid pay taxes, money laundering in Mexico, global sanction busting, foreign exchange manipulation and even insurance mis-selling.
Not only have the bank’s officers been hauled into parliament to explain themselves but they are now under threat of tighter regulation.
HSBC left Hong Kong to facilitate a takeover of the Midland Bank, a merger that stood a good chance of being blocked if the bank maintained its base overseas.
The move to London was predicated on HSBC’s ability to turn itself into a truly global bank. In pursuit of this aim it acquired a strategic presence in 80 countries.
Now the bank has been forced to recognise that much of this expansion was misjudged and costly and has announced a programme of withdrawal from many of these operations.
Meanwhile the bulk of its profits continue to be generated in Hong Kong and the overall profitability of the group would have been greatly enhanced if these profits were not counterbalanced by impressive losses, not least in the UK.
In other words HSBC’s grandiose global strategy has hardly been a stellar success. Like many other corporations dazzled by the prospect of a large presence on the world stage, HSBC has found that more is not better.
Now HSBC directors have declared that they are considering relocation of its domicile. Shareholders have reacted positively because they believe that lighter regulation and lower tax liabilities in Hong Kong will do wonders for the bottom line.
However, long term bank watchers know that HSBC has form when it comes to threatening this and that.
Right now it is threatening to up sticks because the UK is considering new regulatory moves and raising bank levies. It hopes that the threat of relocation will weigh heavily on Britain’s new government when it takes office next month.
The hapless folks at the Monetary Authority think they are being clever by laying out the welcome mat at HSBC’s feet but do they really believe that they are getting back an old friend or are they really storing up new problems?
It was the former British Prime Minister Lord Palmerston who said words to the effect that Britain had no permanent allies or foes, just permanent interests.
This most certainly applies to banks and indeed to the bodies that regulate them. HSBC’s current sabre rattling is not about a second embrace of Hong Kong for reasons of friendship but relates to what Palmerston would have described as its permanent interests.
The Hong Kong regulatory authorities have, or should have, interests of their own and this is why they need to carefully consider what message is being delivered by a bank that is more or less announcing that it can get away with more here than in London.
Then comes the tricky questions, which have already been raised, about whether a global bank can thrive with a base in a region of China whose former distinctiveness is being undermined and where the independence of the judiciary is not to be taken for granted.
A spotlight on these questions has wider repercussions for international businesses considering Hong Kong as a base.
Meanwhile I continue savouring HSBC’s problems. This bank has inflicted a considerable degree of pain and I am reminded of the old maxim about revenge being a dish best served cold.