Hong Kong need not fret about HSBC’s decision to keep its headquarters in London
To remain competitive as a financial centre, Hong Kong must now continually improve on its merits, as well as connections
This may be the Asian century, but the narrative is global. HSBC was never going to return to the Hong Kong home it left more than 20 years ago for Britain – not while it could have the best of both worlds. And London was never going to let a global banking giant go too easily while it wanted to remain a premier financial centre. The result is a pragmatic business decision without pangs as to historic links.
A review of the location of the bank’s headquarters is now off the table indefinitely, instead of the policy of revisiting it every three years. It is hard to find a reason for Hong Kong to be too disappointed. The city continues to be the home of the Hongkong and Shanghai Banking Corporation, the group’s Asian headquarters and biggest source of profits. And the East-West bridge facilitates international capital flows and the cross-border deals that the parent group competes for with other global banks. And as the bank said after the decision, London remains home to a large pool of highly skilled international talent, making it ideally positioned as a home base.
In a sense, the HSBC board’s decision to keep its headquarters in London was a formality. But it only became so after events helped shape the outcome. Investors had encouraged HSBC to consider moving its base from Britain, partly because the 2007-2009 financial crises had prompted the government to impose a tax on banks’ global balance sheets and introduce increasingly tough regulations. The bank undertook a study of whether it should move its headquarters back to Hong Kong.
Two factors came together to settle the issue. The group concluded that a move to Hong Kong would not confer a significant regulatory advantage, because the requirements on the banking sector in the two jurisdictions were similar. And six months ago Britain scaled back the tax on banks amid discontent among international bankers, as part of efforts by finance minister George Osborne to help keep Britain a “highly attractive” place for banks.
The move to London came ahead of Hong Kong’s return to Chinese sovereignty in 1997. The bank says the decision to stay put has nothing to do with last week’s Mong Kok riot. If there were external influences, they are more likely to be volatility in Chinese markets, uncertainty about the city’s political development after 50 years and the reality that one country, two systems may not last forever.
To remain competitive as a financial centre, Hong Kong must now continually improve on its merits, as well as connections.