HSBC yesterday made its most explicit threat yet that it is prepared to leave the UK if the Government adopts the Independent Commission on Banking's (ICB) proposed reforms in full.
Stuart Gulliver, HSBC's chief executive, said the bank's board would not decide on where to base its headquarters at the end of this month as planned and was prepared to wait until 2013 to weigh up legislation based on the ICB's report.
The big issue for HSBC is not the ICB's key recommendation to ring-fence retail and investment banking. Instead, the bank objects to a measure requiring it to raise extra debt capital as a buffer against losses.
Mr Gulliver said the proposal would punish HSBC's prudent balance sheet, which is more than fully funded by customer deposits. Raising $55bn (£35bn) in the market and parking the money in low-yielding government bonds would cost the bank more than $2bn a year, he said.
Asked if the bank would quit the UK if the costs stayed the same, Mr Gulliver said: "We don't know whether the Government will implement the recommendations in the ICB report as currently configured, so we don't have enough facts to make the decision. We are also saying the board is acutely aware of its fiduciary duty to its shareholders. We are trying to make those two [facts] quite separate but also somewhat linked."
Mr Gulliver also took a swipe at Bill Winters, the ex-JP Morgan banker who sat on the ICB. "You need to talk to Bill Winters and so on. It's very helpful if you're JP Morgan or you have JP Morgan's balance sheet or you have an asset-deposit ratio over 100, which in the UK is everyone but us."
The bank is furious that the ICB's proposals penalise it for having more deposits than loans – which it says makes it more liquid and safe than other UK banks.
Barclays and Royal Bank of Scotland have accepted the ICB's reforms but Mr Gulliver has put the Government on notice that he wants a rethink on the issue of how to approach loss-absorbing debt.