According to BBC, London banking giant, HSBC Plc, today announced that they would consider moving the bank’s headquarters out of the United Kingdom. While management has cited the new “regulatory and structural reforms” that took form after the Great Recession as reasoning to leave the UK, there is no official word yet that HSBC will be moving or where they could end up. This is certainly a surprising announcement out of HSBC this morning, but shareholders are loving it so far, with shares up 3.75% in premarket trading.
HSBC Plc – Taxes, liquidity requirements hindering HSBC’s ability to operate effectively
Regulation has really come into focus in the years since the financial crisis. Governments are far less accommodative to banks than they were prior to the crisis. In the past year, HSBC says that the British government has raised its bank levy from 0.156% to 0.21%, which is very straining for bigger banks such as HSBC. Management said they paid 750 million British Pounds in bank levies last year to government. HSBC’s management has also cited the uncertainty with Britain’s future with the EU, offering another reason to pull out of Britain. Ultimately, HSBC is tired of the unfriendly banking environment that Britain has imposed on the industry since the crisis and management has said this is the reasoning that HSBC’s performance has lagged.
HSBC Plc – Asia eyed as possible new target for headquarters
HSBC has been a British bank since 1992, but the institution derives 80% of its profit from Asia, making it a very reasonable assumption that HSBC could be weighing a move to Asia. Some rumbling have said that Hong Kong appears to be a favorite for HSBC in a possible move. However, the problem here is that “HSBC will pay several hundred million dollars more in tax in 2015 [if it stays in the UK], but it would cost several hundred millions of dollars to move the bank to another country,” says Alex Potter, analyst at Mirabaud Securities. Additionally, it must be considered that working with the UK government will be much easier than working with the Chinese government.
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Members of Parliament have called for more business-friendly attitude in London, citing the continued belief that London continually is turning back on banking sector. Ultimately, a move to Hong Kong or elsewhere in the world may prove to be quite costly and it is up to management to decide whether the costs of leaving the UK are worth being paid.