BANKING giant HSBC wrongfooted the industry last week. Ironically, a different perennial question had been whether the bank would move its global HQ back to Hong Kong, where its original roots lie as the Hong Kong and Shanghai Banking Corporation.
That speculation has escalated amid perceived heavier UK financial regulation – witness 10 per cent Standard Chartered Bank investor Aberdeen Asset Management urging that group to consider relocating its domicile to Asia. Also the shift eastwards of the general corporate centre of gravity.
But, out of the blue, HSBC announced somewhere a little less exotic for the new headquarters of its UK arm – Birmingham. Group chief executive Stuart Gulliver and his boardroom colleagues have decided the best way to ringfence the UK retail and business operation from racier “casino” banking and overseas operations is to create significant physical distance between the current group HQ in London’s Canary Wharf towers and the high street arm.
HSBC has had its share of reputational damage, including money-laundering, Libor manipulation and its Swiss arm helping clients to avoid tax to name but three issues. The bank’s political antennae may also have persuaded it that a relocation to the English Midlands would not actually alienate Chancellor George Osborne in his mission to create regional economic powerhouses out of London. Banking brownie points.
The ringfence was a key recommendation of the report by Sir John Vickers in 2011 aimed at ensuring retail banks would not be brought down by mis-steps elsewhere in banks deemed “too big to fail”.
HSBC has therefore been the quickest out of the traps of the big clearers, saying about 1,000 head office jobs will move from the UK capital to Birmingham by 2019.
There is also neat secondary symmetry. The bank, which has 16 million UK customers, bought Midland Bank, a lender with its origins in Birmingham, in 1992. And it already has a decent regional presence, owning First Direct in Leeds and M&S Bank in Chester.
Will it start a UK regional banking diaspora? I doubt it will be dismissed out of hand by rivals such as Royal Bank of Scotland/NatWest and Barclays, given the favourable reaction to HSBC’s decision.
Lloyds, like RBS, still backed by the taxpayer, would probably be less likely to consider such a regional switch, given that it is an overwhelmingly retail and business lending player with little need for technicolour firewall gestures.
There would not therefore be the same gain for Lloyds from making a strong physical split between its retail and non-retail activities.
Far less likely is that it will stifle the rumours that HSBC might one day switch its group HQ to Hong Kong. They will recur whenever the bank has a major issue (banking levy, bonuses etc) with the government. «
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