HSBC’s rumblings over moving HQ sound familiar note

Here we go again. The UK is facing another political decision that could affect its big banks — in this case, a general election in two weeks. And what do you know, HSBC, the UK’s biggest bank by assets, has announced an immediate review into whether to move its headquarters overseas.

If this sounds familiar, that is because it is. HSBC got its start in Hong Kong and moved to the UK in 1993 when it bought a British clearing bank. Since then, it has reviewed its domicile regularly.

You can see why the bank thinks now might be a good time to take stock again. The UK government recently increased its levy on bank assets and the Labour party wants to push it up still further. HSBC’s global spread and size mean that it is on the hook for more than a third of the industry total. But if it had headquarters elsewhere, it would have to pay only the tax on its UK operations — a far smaller share.

At the same time, the UK’s value as a gateway to Europe is under threat, as the Conservatives have promised to hold a referendum on leaving the EU.

HSBC is not the only bank to make noises about relocating. Just last month, top shareholders in Standard Chartered urged that lender’s new chief executive to consider moving its headquarters out of the UK.

While StanChart might struggle to find a country willing to become the lender of last resort for such a large institution, HSBC has an obvious new home in Hong Kong. The territory was the single largest contributor to HSBC’s 2014 pre-tax profits, and the bank already has a friendly relationship with the local regulator. Indeed, the Hong Kong Monetary Authority welcomed the HSBC announcement, saying it had a “positive attitude” towards a return.

But, pardon my cynicism, isn’t this a smokescreen? HSBC’s public rumblings about moving out of the UK tend to surface whenever the bank’s leadership is unhappy with new taxes or regulatory changes. In 2010, for example, Stuart Gulliver, who is now the chief executive, publicly warned that he was “genuinely concerned” about a then-popular proposal to break up universal banks and that it would affect HSBC’s decision on where to put its HQ. The UK dropped the split idea in favour of the less drastic option of ringfencing retail banking, and HSBC is still British.

Moving headquarters is easier said than done, what with all the IT and risk management changes that would be required. In addition, HSBC would still have a substantial UK presence, so it would not fully escape either the bank levy or the tough regulatory scrutiny that has followed the financial crisis. Eight of the top 10 fines ever levied by UK financial watchdogs have hit non-British banks. Some shareholders have also raised long-term concerns about being a western bank based in a territory ultimately controlled by China.

Besides, HSBC’s leadership has good reason to drop a politically charged bombshell on the morning of its annual general meeting. In the past three years, HSBC has been hit by a string of problems including money laundering, sanctions busting and facilitating tax avoidance. Mr Gulliver has drawn fire for his £7.6m pay package and his personal tax status.

At the AGM, small shareholders still hammered the bank on the scandals. But the shares popped and big institutional investors are wondering if a head office move could boost their dividends. It is far easier for the board to talk about that than prove they have cleaned up the mess.

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