By Max Colchester
LONDON-- HSBC Holdings PLC said Friday it was reviewing whether
to move its headquarters outside the U.K., a high stakes decision
which comes as the bank faces tighter regulatory scrutiny and
higher taxes in the country.
The lender, which has large Asian operations but is based in
London, said in a statement that it didn't know when a decision
would be made.
HSBC's management has long wrestled with whether the bank should
be domiciled in the U.K. and in the past it conducted reviews every
three years on whether to relocate. This stopped following the
financial crisis as the bank waited for regulatory rules to be
finalized.
On Friday the bank's Chairman Douglas Flint said that the final
regulatory rules were taking shape. "As part of the broader
strategic review taking place, the board has therefore now asked
management to commence work to look at where the best place is for
HSBC to be headquartered in this new environment," according to a
copy of a speech Mr. Flint is set to give at the lender's annual
shareholder meeting.
Friday's announcement comes amid campaigning for a U.K. general
election on May 7, during which political parties have targeted
banks as potential cash cows to fund an array of new policies.
Bank executives are irked by recent moves to again raise the
U.K.'s bank levy. The levy, which was launched in 2010, is
determined as a percentage of a bank's balance sheet and HSBC,
which has vast global operations, pays the most--$1.1 billion last
year. Non U.K. headquartered banks are only taxed on their U.K.
balance sheets.
Other London-based lenders with big foreign operations have been
affected too. Standard Chartered PLC's investors have talked about
whether the bank, which does most of its business outside Europe,
needs to be headquartered in London. The bank is reviewing whether
to move its headquarters abroad but is waiting for the elections to
pass before making a decision, according to a person familiar with
the matter.
The cost of moving wouldn't be punitive as both banks have
substantial operations in Hong Kong and Singapore respectively, say
analysts. Bernstein Research puts the moving cost at between $1.5
billion to $2 billion. However, questions remain whether other
countries would want to regulate and potentially bailout such large
banks.
HSBC moved its headquarters from Hong Kong to London in 1993
after it acquired a U.K. bank, Midland. HSBC in March announced
that it was moving its U.K. retail operation's headquarters and
around 1000 jobs out of London to the city of Birmingham. This has
raised speculation among bank executives that it would look to spin
off its British retail bank, a move that the lender has so far
denied. In 2014 Asia, Middle East and North Africa generated 70% of
the bank's adjusted profit before tax.
The bank has suffered a bruising couple of months at the hands
U.K. politicians. HSBC's Swiss unit has been under the spotlight
for years, following the theft of data by a former employee and the
opening of a criminal investigation by U.S. authorities into its
alleged aiding of tax evasion. In the last past months Chief
Executive Stuart Gulliver and Mr. Flint were hauled in front of
British lawmakers to discuss the bank's efforts to clean up its
Swiss operations. Senior board members were also criticized for
their perceived lack of oversight.
In an effort to appease shareholders, the bank has hired
headhunters to search out replacements for the chairwoman of HSBC
North America Holdings, Rona Fairhead, and HSBC's deputy chairman,
Simon Robertson, according to a person familiar with the
matter.
Meanwhile the bank has suffered underwhelming financial results
as it wrestles with higher compliance costs. HSBC recently cut some
medium term financial targets.
Write to Max Colchester at max.colchester@wsj.com
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