HSBC may leave the UK if forced to split

HSBC has hinted it may consider moving its headquarters overseas if a commission on banking reform recommends banks split their investment banking arms from their retail operations.

HSBC's head of investment banking Stuart Gulliver told a conference on banking he is ‘genuinely concerned’ that banks will be forced to split their businesses, which he said would have ‘significant implications’ for where HSBC chooses to locate its headquarters, currently in Canary Wharf.

HSBC’s chairman Stephen Green has already warned that unilateral rules could mean London will become less attractive than rival cities such as Hong Kong and Zurich, while Angela Knight, chief executive of the banking lobby group British Bankers' Association, has warned that would mean the UK could lose billions in tax revenues.

In June chancellor George Osborne announced that the head of the Office of Fair Trading, John Vickers, will head up a commission to consider whether any banking industry reforms are necessary to prevent a re-run of the financial crisis.

As well as looking at increasing competition and reducing the risks and impacts of bank failures the commission will consider how much competitive advantage large banks get ‘from being perceived as too big to fail’.

But bankers have repeatedly said that while there are many lessons to be learned from the financial crisis there has been little evidence that size mattered.

Barclays’ chief executive John Varley has said historical data shows that bigger, more complex banks are not more likely to fail.

‘The evidence from the last 100 years is clear. By converting broad banks into narrow banks we will make the system less safe not more safe,’ he said earlier this year.

HSBC - which employs 50,000 staff in the UK - refused money offered by the UK government at the peak of the crisis and was relatively unscathed by the crisis thanks to its focus on Asia.

In January this year chief executive Michael Geoghegan relocated to Hong Kong but the bank said this reflected the rising importance of the Asian market and was not the start of a large scale move.

And yesterday Gulliver pointed out the bank's preference 'is to be headquartered in the UK.'

Bruce Packard, banking analyst at Seymour Pierce, has warned that the vociferous opposition from the banks to proposals to split them up means they may be missing a trick, saying that break-ups could create value and pointing out that the deposits guarantee by the UK government is too good to shun.

‘We believe that management who ‘grasp the nettle’ and do what the regulators and politicians want are more likely to create shareholder value,’ he said.