The ‘Not so Local’ Bank

The posturing over future banking regulations continues to make headlines and here at Zeitgeist we’ve referred to the ongoing tug of war on numerous occasions in the past.
The latest episode in the UK sees HSBC threatening to move its Head Office to the Far East from London should future banking reforms become too restrictive and specifically if the requirement will be for banks to separate their investment arms from retail banking. This of course would spell the end of the universal bank.
Moving headquarters to a less tightly regulated location would be relatively simple to achieve for some – HSBC’s eastern heritage makes Hong Kong a likely destination and, after all, their CEO Michael Geoghan has made Hong Kong his home since February this year. Standard Chartered makes most of its profits from the Far East, so it too would likely follow suit and, again, relatively easily. Barclays is probably the third most obvious candidate as it would be keen to retain its Barclays Capital Investment Bank.
As for other candidates, in both the short and medium term it is probably a stretch for Lloyds Banking Group or RBS to be viewed as relocation candidates due to the fact that their major shareholder continues to be the British Government.
This is an interesting dilemma once again then for the Government and Regulator and reaffirms the complexity of balancing regulation and the power struggle that continues to go on. The threat of these actions is both unsurprising and clearly intended to influence the ultimate decision and test political will.
This decision affects many in the UK – shareholders might be attracted to the improved returns achieved through potentially less punitive tax requirements but, on the flip side, there could be considerable impact in terms of job losses and, potentially, the end of London as a major global financial centre.
Despite the recovery, regardless of how slow, the effects and impacts of the financial crisis at a number of levels continues and will do so for some time to come. We’re observing with interest…