Bloomberg News

HSBC Says Potential $2.5 Billion Cost of U.K. Rules ‘Too High’

November 09, 2011

Nov. 9 (Bloomberg) -- HSBC Holdings Plc, Britain’s biggest bank, described the estimated $2.5 billion joint cost of the U.K. bank levy and the Independent Commission on Banking’s proposals as “too high.”

If the commission’s proposals are implemented as they stand, HSBC may need to sell about $55 billion of loss-absorbing debt which “we do not need” at an annual cost of about $2.1 billion, Finance Director Iain Mackay said on a call with journalists today. Added to that, the lender estimates that the British bank levy will cost about $400 million a year for its overseas operations.

“We would probably view that cost as being too high,” Mackay said. “As more facts become available to us then we will clearly act in the best interests of our shareholders and the board of directors will make decisions recognizing those fiduciary responsibilities.”

HSBC and Standard Chartered Plc, the two U.K. lenders dependent on Asia for a majority of their profit, faced calls from investors to consider moving after the U.K. government imposed a bank levy last year. The ICB said in its September final report that banks’ retail units should have a “loss- absorbing capacity” of at least 17 percent to 20 percent.

HSBC would probably not be in a position to take any decision on its headquarters for at least another 12 to 18 months, HSBC Chief Executive Officer Stuart Gulliver, 52, said on a separate call with journalists today.

‘Non-Trivial Decision’

“This is a non-trivial decision,” Gulliver said. “You don’t move your head office on a regular basis. You need to have all the facts at your disposal and very calmly and very coolly analyze. We don’t have enough information yet to get into that analytical framework.”

HSBC is discussing the issue with the Treasury, Gulliver told a parliamentary committee hearing last week.

Hong Kong would “absolutely” welcome HSBC and Standard Chartered if they decided to move headquarters to the former British territory, CEO Donald Tsang said in September.

In March, HSBC Chairman Douglas Flint and Gulliver said in a statement that talk of an “imminent change” of headquarters was “entirely speculative and presumptuous.”

--Editors: Francis Harris, Jon Menon

To contact the reporters on this story: Howard Mustoe in London at hmustoe@bloomberg.net. Gavin Finch in London at gfinch@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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