New banking regulations could force HSBC overseas, says Chairman

HSBC, the UK’s biggest bank, is considering moving its headquarters overseas to avoid the effects of changes to UK banking regulations, according to its Scottish-born chairman.

Douglas Flint told shareholders in Hong Kong, where the bank was founded in 1865, that a review of its main base was imminent due to the extent of UK regulatory changes.

He said as soon as the “mist” of banking reform lifts, “we will once again start to look at where the best place for HSBC is”.

HSBC has been based in London since 1993 when it took over the Midland Bank but still has extensive operations in the far east.

The bank has traditionally reviewed its head office location every three years, but has delayed the next review indefinitely in the face of regulatory changes being introduced by the UK’s coalition government.

New rules for UK banks are forcing lenders to ringfence high street business operations from those of investment banking in order to comply with reforms set out by Sir John Vickers in his review of banking in the wake of the financial crisis.

Speaking to Hong Kong shareholders who questioned whether the bank should remain in London, Mr Flint, who was born in Glasgow, said: “We are beginning to see the final shape of regulation, the final shape of structural reform and as soon as that mist lifts sufficiently, we will once again start to look at where the best place for HSBC is.”

HSBC will hold its annual meeting in London at the end of the week but bosses also used the Hong Kong meeting to apologise to shareholders for activities in the bank’s Swiss operations.

Chief executive Stuart Gulliver apologised for HSBC’s conduct following revelations that it had assisted customers in dodging taxes.

Leaked files about the accounts of customers of HSBC’s Swiss banking arm between 2005 and 2007 has put pressure on Mr Flint and Mr Gulliver, who have both appeared before committees of MPs to explain the tax avoidance advice that was offered.

Meanwhile, HSBC has hired the headhunter MWM to freshen up its board. After the criticism of its activities in Switzerland, HSBC revealed that the next chairman would come from outside the bank.

Its leaders, however, are expected to receive some support from big investors this week for their handling of the increasingly difficult regulatory environment.

Martin Gilbert, chief executive of Aberdeen Asset Management, which owns 1.6 per cent of HSBC said: “The management, including Stuart, Douglas and the chief financial officer, are doing a great job tidying up the bank and they deserve the support of shareholders.”

He added: “I would imagine there will be fireworks because banks, and big banks particularly, often have difficult annual meetings.”

He said investors would welcome any move to simplify the globe-spanning lender.