HSBC could exit Britain under new rules

| November 9, 2011 | 0 Comments
HSBC could exit Britain under new rules

HSBC has re-iterated its threat to leave Britain if the government’s proposed banking reforms are introduced.

The new capital rules, recommended by the Independent Commission on Banking, could cost HSBC $2.5 billion a year, a price which it may be unwilling to pay.

HSBS has had its headquarters in the UK for the last 20 years, but may move them back to Hong Kong or elsewhere in the new regulations are introduced.

However, a decision will not be taken until next year at the earliest.

The warning came as shares in HSBC fell more than 5 percent, after the bank announced a 36 per cent fall in underlying pretax profit to $3 billion in the three months to the end of September, compared with the same period a year ago.

The bank aims to reduce annual costs by $3.5 billion and exit countries where it lacks scale, including Poland and Georgia, while focusing more strongly on the Asian market.

It is expected to sell retail businesses in Russia, Poland and Chile, its brokerage business in Canada and its $1 billion general insurance business.

The bank’s loan impairment charges in the third quarter increased by $700 million compared with the 2010 third quarter, with an increase in provisions for its mortgage portfolio in North America cited as a major contributory factor to the increase.

This relates to HSBC’s acquisition of Household Finance, which provided sub-prime mortgages to US customers with a poor credit history.

HSBC has now closed this business and is running down its $50 billion loan book.

It was also revealed today that HSBC and RBS will be required to hold an additional 2.5 per cent of their assets as insurance against the possibility of a market meltdown.

The two banks, along with Citigroup and JPMorgan Chase of the US and BNP Paribas of France, have been named as key banks whose failure would have the most devastating effect on the global financial markets.

Tags: banking regulations, financial markets,

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