Liberal Conspiracy noted this - I missed it:
The Financial Times today has an astounding editorial comment.
It is also very spot on. An excerpt:
While everyone pays lip-service to the need for a safer system, not everyone’s commitment runs very deep. In recent months the financial sector has been lobbying ever more fiercely against structural change or higher capital requirements, arguing that the banks are pretty much safe as they are.
Institutions have warned that further regulation would simply result in defections to less onerous jurisdictions. HSBC is talking to its shareholders about whether it should move its domicile to Hong Kong. Standard Chartered has hinted that it might do the same.
Such threats should be faced down, not just because they are unreasonable but because they are of questionable credibility.
It is not clear what “moving abroad” actually means. Were a bank such as Barclays to shift its headquarters, the impact on the UK would surely be minimal as it would still do much of its business and pay taxes in the country.
What is more likely anyway is that rather than upping sticks altogether, some banks may reduce their new investments in Britain. This might make the City slightly less of a hot spot, but it would not be a disaster. And were it to be the price of financial stability,this would be a price worth paying.
This is the argument many on the Left had been making for years — that the City was holding governments hostage to low regulation and massive bonuses by threatening to move.
For the FT to say the government should call their bluff shows not only how shallow this threat is, but illustrates how little the FT thinks the banks have changed.
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But you will look foolish when they go.
Robin hood tax will certainly reduce activity.
So what. We can have different activity that is genuinely productive.
Call their bluff. Make the banks stable and focused upon what society requires them to do – distribute the capital efficiently to productive endeavours.
Richard, I honestly think the FT (and by implication you) are showing some ignorance of history. HSBC was originally a bank established in Hong Kong and most of its corporate structure still sits beneath the Honk Kong and Shanghai Bank incorporated in Hong Kong. HSBC Holdings (the UK holding company) was only established in 1991 and holds the shares in the Hong Kong Bank and also in the former (UK) Midland Bank and the (US) Marine Midland Bank and other non-Asian parts of the bank. But by far the greatest part of the group and its main areas of growth lie below the Hong Kong and Shanghai Banking Corporation. It would be a relatively simple matter to transfer all of the shares held by the UK holding company to the Hong Kong holding company and swap the shares of current HSBC shareholders for Hong Kong and Shanghai Banking Corporation shares, effectively reversing the 1991 transaction.
Standard Chartered is even more likely to move outside the UK. It has a head office in the UK but only one branch, and its presence in the UK is far smaller than in Hong Kong. It was formed by a merger between an Indo Chinese Bank (Chartered Bank) and a South African Bank (Standard Bank) and chose London as a headquarters as a compromise, but since the South African part has long since been sold off and all of its operations and its acquisition are in Asia, I wouldn’t be surprised if it moved its headquarters to Hong Kong, Mumbai or Singapore.
There are plenty of precedents for “colonial” banks that have emigrated from London when it was deemed that colonial legal systems were adequate. Some of the first banks in Australia and New Zealand were incorporated in London and transferred their head offices out of London after the second world war.
I would think it very unlikely that either Barclays, RBS or HBOS would move their head offices, not least because they would need approval from wherever they decided to move to, but that does not mean that they and more significantly other international banks who actually make up more of the “City” (i.e. Deutsche Bank, JP Morgan, Citi, Bank of America, UBS, Goldman Sachs, Morgan Stanley, Credit Suisse, Dresdner, the other German, French, Japanese, Dutch, Italian and Spanish banks) wouldn’t move some of their business elsewhere or stop creating new posts here and create them in other countries over time.
@MarkT
None at all
That was when HK was British you know
Recall why they came here
Recall why Standard Chartered here
the rule of law and all that – important stuff
It’s you who is showing signs of ignoring issues
@MarkT and @ Matthew: you miss the 2 key points.
A:
Moving HQ only incidentally impacts the tax revenue.
B:
Reductions in this kind of dangerous activity which causes financial instability is “a price worth paying”, or even welcome as an end in itself.
See Yves Smith “Naked Capitalism” for dozens of ways in which the banking sector is harmful.
We need to be confident about what we have to offer here in the UK. Those who would make decisions about relocating their banks will be multi-millionaires and being based in London is a great attraction, not only for business purposes but also socially, for the very wealthy. Let’s face it, they can also buy another home elsewhere.
Having worked in Singapore, Dubai, Zurich and Gibraltar, I have learned how their minds work.
So what if HSBC and Standard Chartered leave London. It’s only the HQs that will leave. I doubt HSBC will close its UK branches and even if it does another bank will step into the breach. Anyway, there will be a nice “exit charge” payable to the Treasury when they leave.
Realistically, I cannot see any bank wanting to leave such an important and profitable financial centre as London. In any case, London would soon recover.
I am quite well aware of the history. The issue is about relative costs and advantages. In 1989 when Standrd Chartered was formed and in 1991 when HSBC was formed the UK looked a safe political bet compared to Hong Kong and much of Asia.
Right now, HSBC and Standard Chartered, who weren’t bailed out by anyone, and had very little to do with the securitisation and sub-prime mortgages that caused problems for US banks and other major European banks, are being threatened with costs imposed by the UK government that are largely unrelated to their businesses, and somewhere like Singapore which has a pro-business but not laissez-faire attitude and a sound legal system might make a very sensible new home.
You clearly do not understand the tax positions of HSBC and particularly Standard Chartered. The latter bank has only 1 branch in the UK and several thousand overseas. Consequently all of its income is brought into the UK to be distributed to shareholders and the UK Treasury gets a free ride to the extent of the difference between the UK tax rate and the generally much lower rate applied overseas.
@MarkT
We fully understand – completely and utterly
Don’t patronise
And I stand exactly by what I said
@MarkT
They were bailed out – the system was
Guarantees applied to HSBC
HSBC may have been bailed out (by the US government in connection with AIG, but not by the British government who let AIG run up an unregulated $800 billion guarantee position in its Curzon St offices), but I think you will find that Standard Chartered is a completely different beast.
Standard Chartered has very little exposure to the UK. Nearly all of its assets and liabilities are in Asia and Africa, and its operation in London is responsible for head office activities (credit decisions, accounting, personnel, software development) and some origination of business for export finance and finance for projects in Asia. They aren’t renowned as an “investment bank”, but more of a commercial bank financing trade and commerce in parts of the world where other larger banks don’t go because they don’t have the inclination to understand the risks, and I suspect that they don’t pay extraordinary bonuses to their staff.
Standard Chartered were no more bailed out by the UK government than you or I were, so if they are provoked I wouldn’t be surprised to see them move.
The same arguments apply but to a lesser extent with HSBC.