HSBC declares that it is staying in London…. again

Good news has emerged today for liquidity providers and prime brokerages in the West, especially London, as  HSBC Holdings plc (LON:HSBA) once again declares that it is remaining in London and considering its unmistakable Canary Wharf operations to be its global headquarters. HSBC is a major FX liquidity provider, with its market share being the […]

Brexit: time to engage

Good news has emerged today for liquidity providers and prime brokerages in the West, especially London, as  HSBC Holdings plc (LON:HSBA) once again declares that it is remaining in London and considering its unmistakable Canary Wharf operations to be its global headquarters.

HSBC is a major FX liquidity provider, with its market share being the highest in the world for corporate clients during 2015 at 8.94%, having moved ahead of Citi.

Citi had held its position as the company with the largest market share for FX corporate clients for a remarkable 39 years until 2015, when HSBC took its crown.

Many large financial institutions which handle the lion’s share of the world’s interbank FX order flow have been considering a move to the Far East during recent months, HSBC, RBS, Barclays and Standard Chartered included, all of which have focused their attentions on markets in the Asia Pacific region, such as Singapore and Hong Kong, and in some cases openly stating the focus toward the East in their annual reports.

Whilst it is entirely possible that some of the other major FX dealers may head East, HSBC has now stated that it is staying put in London, again…

Why “again?”

The bank stated publicly yesterday evening that the UK is an “important and globally connected economy” with “an internationally respected regulatory framework and legal system.” Congruently, HSBC also considers London to be a very prominent financial center with a very strong talent pool.

HSBC Chairman Douglas Flint stated

“As we evaluated jurisdictions against the specified criteria, it became clear 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.”

Hong Kong was very much a feasible consideration for the relocation of HSBC’s global headquarters. After all, the bank’s origins lie in the heartlands of Central Hong Kong during the British era, and the bank prints Hong Kong dollars for the Hong Kong central bank, alongside Standard Chartered.

The board of the bank explained that it would not be continuing its practice of reviewing the headquarters’ location once every three years, as it was no longer deemed necessary.

Instead, a relocation will be reviewed if there is a material change in circumstances, however the policy of reviewing the location of the headquarters is slightly incongruous to many reactionary reviews with regard to staying in London that major banks, including HSBC, have made.

Geopolitical and economic factors have caused interbank FX giants to react quickly and consider a relocation to Hong Kong or Singapore, one particular example being the run up to the UK General Election in 2015, in which there was much clamor in the boardrooms of large banks in the City and Canary Wharf. Should a Labor (socialist) government have been elected, an exodus was inevitable.

Rival interbank FX giant RBS considered moving its headquarters from Scotland to south of the border had the Scottish National Party gained power in Scotland and a devolution from the United Kingdom had taken place, demonstrating that banks will protect their interests under such conditions and yet continue to look where the real go-getters are for high-volume, high-quality business.

The Asia Pacific remains very high on the agenda for HSBC, with the bank’s CEO Stuart Gulliver today having stated

“Having our headquarters in the UK and our significant business in Asia Pacific delivers the best of both worlds to our stakeholders.”

One factor that may well have influenced the decision to remain in London for the time being could be the revenue increases that the company experienced during the third quarter of the financial year, as well as having recorded a massive 32% increase in pre-tax profit.

In conclusion, although HSBC has now ceased its review of headquarters location every three years, and has stated that it is staying in London, the move to Hong Kong could still be very easily facilitated as the company is so prominent there, and within many sectors of the FX industry, the APAC region is the epicenter of the future face of the FX business worldwide.

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