US will ‘scupper’ move by HSBC to Hong Kong

Showdown looms with regulators in the States over assets of £190bn

HSBC is facing a showdown with US regulators who could scupper any attempt to move the bank’s headquarters to Chinese territory.

The London-based bank announced on Friday in the wake of the furore that it would have another look at its options.

Analysts were describing Hong Kong as ‘the only faintly credible option’, but senior lawyers and accountants said the US would try to block such a move out of concern over Chinese influence on the bank as it has major US operations.

HSBC’s US arm has a balance sheet worth £190billion.

A senior banking lawyer said: ‘The US has got issues with China supervising banks and Hong Kong is increasingly managed by the Chinese. HSBC is not as mobile as you might think.’

Tax advisers added that a Hong Kong-based bank might have to pay taxes of up to 30 per cent on any dividends paid from its US subsidiaries, potentially nullifying any savings from avoiding the UK’s bank levy.

Regulatory experts said US authorities would ramp up efforts to make sure HSBC’s US business was separately financed from the rest of the bank if it moved to Hong Kong.

They suggested that the extra capital required might make the US business unprofitable for the bank.

HSBC has already suffered from strained relations with US regulators after its US business was fined for allowing its branches to be used to launder drug money across the border with Mexico and for being in breach of sanctions against Iran.

The bank stressed last week that it was only undertaking a review and that no decisions have been made. The City reacted positively to the possibility with shares in HSBC jumping 3 per cent on the news.

But some experts have questioned where apart from London the bank could realistically base itself in its current form.

Central banks in Hong Kong and Singapore, both possible Asian destinations for HSBC, might not wish to be responsible for the bank’s vast £1.7trillion balance sheet.

A regulatory expert said: ‘In order to make a bank safe you have to have central bank liquidity. Where does that come from?’

Some said the motivation behind the bank’s possible move was fear that Britain may leave the EU. But an official statement from the bank said the review had been prompted because HSBC was ‘beginning to see the final

shape of regulation and of structural reform, including the requirement to ringfence’.

The Hong Kong Monetary Authority said on Friday that it would welcome the bank back to Hong Kong, where it was based until 1992. ‘HSBC is the largest bank in Hong Kong and has deep historical links,’ it said.

HSBC pays a huge chunk of the UK bank levy, which is charged on all of its global assets and not just those in the UK. It paid £750 million of the £1.9 billion raised by the tax last year.

There are fears that if HSBC and Standard Chartered both leave the UK, the levy would be raised so that the other banks pick up the slack. A tax expert said: ‘The Treasury sets a target for the levy up front and when it failed to raise the targets all that has happened is they put up the levy rate.’