London 1, Hong Kong 0.
The global banking behemoth HSBC has decided to keep its headquarters in the British capital after flirting with the idea of a move to Hong Kong amid concerns over tougher regulations and higher taxes in the U.K.
After a 10-month review, the HSBC board unanimously voted to stay in London, concluding that the U.K. remains “an important and globally connected economy,” the bank said in a statement Sunday.
“It has an internationally respected regulatory framework and legal system, and immense experience in handling complex international affairs … [and is] home to a large pool of highly skilled, international talent,” HSBC said.
The U.K. government can breathe a sigh of relief, as HSBC’s decision was widely seen as a test of London’s enduring status as an international financial center.
When HSBC announced in April that it would consider leaving the U.K., the British economy was growing strongly. But executives were concerned a May election could result in a more hostile environment for companies, or put the country’s membership in the European Union at risk.
At the time, the opposition Labour Party had announced plans to take banking regulation even further. But Prime Minister David Cameron’s Conservative Party won the election, keeping the political climate more in favor of businesses.
The big question over the U.K.’s future in the European Union remains, however, with Cameron having promised to hold a referendum on the issue by the end of next year.
Moving to Hong Kong would have been a homecoming of sorts for HSBC — the bank was founded in the city while it was a British colony. In 1992, the bank relocated its headquarters to the U.K., after buying Midland Bank.
The importance of HSBC’s Asia business — particularly in China — has also risen significantly over the years, accounting for 80% of the bank’s profit. It made $12 billion in Asia in 2014, compared with a loss of $257 million in Europe.
Hong Kong also offered the appeal of lower corporate taxes and less strict banking regulations than the U.K.
But HSBC’s review found that “the combination of our strategic focus on Asia and maintaining our hub in one of the world’s leading international financial centers, London, was not only compatible, but offered the best outcome for our customers and shareholders,” said Douglas Flint, the group’s chairman.
Despite the bank’s decision to remain in the U.K., it reiterated that Asia “remains at the heart” of its strategy.
Hong Kong authorities said they respected the bank’s decision.
“For a large international bank such as HSBC, relocation of domicile is a very major and complicated undertaking,” said Hong Kong Monetary Authority chief executive Norman Chan.
HSBC said it has now decided to stop reviewing the location of its headquarters every three years and will “only revisit the matter if there is a material change in circumstances.”
–Ivana Kottasova contributed to this report