The bank HSBC has decided to keep its headquarters in the City of London. This decision follows a 10-month review into the HQ 's current location. Throughout that time period the government has been seen as granting HSBC a number of concessions in order to keep them here.
The chief executive of HSBC, Stuart Gulliver, said that:
"Having our headquarters in the UK and our significant business in Asia Pacific delivers the best of both worlds to our stakeholders."
Following a board meeting in London, the announcement of the decision was made. The bank has currently held its headquarters in London since 1992, where it moved following the takeover of Midland Bank. This news arrives against the backdrop of a week 's break from trading in China due to holiday season. The global markets have continued in tumultuous fashion as fears around the stability of the banking sector persist.
The largest bank in Britain said that it will now put an end to its policy of reviewing HQ locations every three years. The bank did not reveal all considered locations but commented to say:
"In the later stages of the review, the analysis was narrowed down to the group 's home markets, the UK and Hong Kong, both of which are considered by the board to be world-class financial centres with high quality regulatory regimes capable of hosting a global systemically important bank such as HSBC."
HSBC is one of the largest companies on the FTSE 100 and is the largest bank in the UK but times haven 't been great for them recently. Their share prices are currently floating around levels last seen in 2009- immediately after the economic crash. Their chief executive last week said that the bank was currently facing a "very challenging operating environment". He said this as the bank revealed that they were back-tracking on the announced pay freeze that was only revealed two weeks ago.
The review that was conducted by the bank was started back in April, around the same time that the bank issued a warning over the possibility of the United Kingdom leaving the European Union. That review and the statement over the EU provoked many months of fierce political debate, at the end of which the Conservatives took power.
In the time that followed, George Osborne 's rhetoric and policies towards the banks have changed significantly. He initially stated that he would crack down on the way that banks went about their business in order to make them more accountable for irresponsible trading. He also said that he was to reverse the burden of proof with regards to bankers but that has now reverted to normal practice.
The chancellor also changed the way in which banks are taxed. He initially brought in a bank levy on banks ' balance sheets. This system would have hit HSBC harder than any other bank. This has now been cut back and a new corporation tax level is seen as hitting the smaller banks the hardest. Economic experts have worked out that these changes mean that HSBC will now pay roughly £300 million as opposed to before where they would have had to have paid £1 billion.
The bank had also been facing serious questions about the tax practices of its Swiss arm, in the aftermath of many media investigations.
The bank commented to say:
"The UK is an important and globally connected economy. It has an internationally respected regulatory framework and legal system, and immense experience in handling complex international affairs. London is one of the world 's leading international financial centres and home to a large pool of highly skilled international talent. It remains therefore ideally positioned to be the home base for a global financial institution such as HSBC."
The bank also noted the significant steps that the UK has taken to offer the renminbi, the Chinese currency, more exposure on the world markets. HSBC 's strong presence in China means that it is keen to see this happen.
The Treasury said:
" HSBC 's decision to keep the HQ in the UK is a vote of confidence in the government 's economic plan, and a boost to our goal of making the UK a great place to do more business with China and the rest of Asia."
"This is a relief for the chancellor," said Gregor Irwin, a former Treasury official and now chief economist at Global Counsel, a London-based consultancy. "It would have led to questions about his judgment had they left."
"My aim, and what I 'm working to achieve, is making Britain the best place to be a global firm," Osborne said in Davos, which was hosting the annual meeting of the World Economic Forum. "For five years we 've unashamedly backed business, large and small."
If HSBC had left the UK, voters would have been left wondering: "whether the government got the balance right between conservative regulation and raising money from the sector, while allowing the banks to be internationally competitive and operate profitably," said Irwin, who also once worked at the Bank of England. "As it is, it will be a mishap that has been avoided."
Henny Sender of the Financial Times says that there are a number of combining reasons that led to HSBC 's recent decision:
"For a start, the regulatory risk has soared as local and foreign investors have lost their faith in the government and regulators ' ability to manage the markets and the currency. That matters to HSBC because if it had shifted back to Hong Kong, the People 's Bank of China would have been in effect its regulator and certainly its lender of last resort."
"Now though, the opportunity seems both smaller and less seductive. Growth is slowing, albeit off a huge base. The sources of growth are also changing; in future China will be more domestically driven. There will be less business for a foreign bank ó and Beijing will always regard HSBC as a foreign bank."
"Moreover, this is no time to be aggressively expanding in China. Mr Gulliver is an astute risk manager, who was running Asian markets during the Asian financial crisis from Hong Kong. For more than two years he has been bracing for a slowdown in China, reducing his counterparty risk with smaller financial institutions and dealing only with the most blue-chip borrowers. Although the announcement of the decision to stay in London spoke of the "particular emphasis" HSBC is putting on investing further in the Pearl River Delta", it neglected to say that most of that is in financing HSBC 's Hong Kong corporate clients as they go across the border."