HSBC Bank Plans To Move Head Quarters From UK: Hard Regulations and Uncertainty Over EU Ties Cited As Reasons

HSBC, one of the world's largest banks is saying that it will move its headquarters out of the U.K., frustrated by hard regulations and looming uncertainty over Britain’s future in Europe, as the May elections are likely to throw up anti-EU positions. Bank chairman Dougles Flint said, "the regulatory and structural reforms which have been put in place post crisis for the bank's decision to launch a review.”

The chairman said the question is a complex one and it is too early to say how long this will take but he said the work is "underway." Incidentally, the bank is celebrating its 150th anniversary in 2015. It has 266,000 employees worldwide and in the U.K., the staff strength is 48,000. The shares of HSBC jumped 3 percent in London after this announcement. The HSBC headquarters in London's Canary Wharf is its biggest office in the world and employs 8,500 people.

Largest Bank

HSBC has assets worth US$2.63 trillion (AU$ 3.32 trillion) and pre-tax profits of $18.7 billion. It is Europe's largest bank and the only global British bank. But the problem seems to be that notwithstanding the growth in Britain’s economy, its executives are concerned that results of upcoming poll may result in a hostile environment and could put U.K.'s membership of the European Union at risk. For many of the U.K. parties, exiting the EU is a priority and Conservatives led by Prime Minister David Cameron have already committed a referendum to decide on Britain's EU membership.

"One economic uncertainty stands out that of continuing UK membership of the EU," said Flint. HSBC had been warning the consequences of quitting the EU could be painful. Though the group operates in 70 countries, 80 percent of its profit comes from Asia, where it made US$12 billion in 2014 compared to the loss of $257 million in Europe.

Choice Of Hong Kong

It is expected that the bank may opt for Hong Kong as the choice of its new headquarters. The bank was founded in that city when Hong Kong was a British colony. It relocated to the U.K. in 1992, after buying the Midland Bank. The Hong Kong Monetary Authority has welcomed HSBC saying that it would take a "positive attitude" if the bank decided to move back to Hong Kong.

Meanwhile, the Guardian reports that HSBC has a problem in shifting to the U.S. because HSBC operates in the U.S. under a deferred prosecution agreement because it is facing a case of money-laundering for Mexican and Colombian drug cartels and was slapped a fine of $1.9 billion in 2012.

Hit By Regulations

In Britain, HSBC is mainly peeved by some specific aspects of the regulations that followed the 2008 financial crisis. It involved harder rules on capital requirements, bankers' bonuses and requirement that big banks have to hive off retail units from the rest of their operations. "The recent past has been very difficult for HSBC," Flint said.

The bank fears that things may get tough because all major parties in the U.K. are looking to tax the big banks heavily, to fill up the persistent budget deficit of Britain. Having headquarters in the U.K. means HSBC will have to pay a bigger levy. Its hefty levy bill for 2014 was $1.1 billion.

(For feedback/comments, contact the writer at k.kumar@ibtimes.com.au)