Outlook Having dispensed with HSBC's mission to be the "world's local bank" within months of becoming chief executive at the end of last year, Stuart Gulliver continues to play the hard man. It is impossible to see Mr Gulliver's wait-and-see approach on how many of his 30,000 job cuts might fall in the UK as anything other than an explicit warning to reformers of the banking system here: the assumption must be that if HSBC does not get the results it hopes for from Sir John Vickers' Independent Commission on Banking (ICB) next month, the UK will take a larger share of the redundancies.
Note, too, the veiled threats to relocate the bank's headquarters to Asia. While Mr Gulliver says the bank has no plans to do so and would prefer to stay in London, he remains a commitment-phobe – the prospect of the move has, like a noxious smell, been left hanging in the air. Look out for the wrinkled noses in the Treasury and elsewhere in government.
Should we be affronted by HSBC's efforts to lobby for the best outcome (for it) possible from banking reform? No – any more than we should reconsider that reform. The lesson here is Gordon Brown's famous admission that he regarded his biggest mistake as Chancellor to be easing financial regulation after promises of riches from the City. HSBC's job is to fight for its own interests. The ICB's task is to make the case for the reforms it deems necessary for financial stability – not to worry about whether those reforms might hit the banks' bottom lines or to prompt them to impose disproportionate job losses in the UK.
In any case, HSBC's move away from the UK has already begun. Mr Gulliver's determination to rein in business activities in less profitable trading centres does not extend to Britain – officially. But you can bet he sees this country as a less exciting growth area than many others. Indeed, those 30,000 job losses will be mitigated by hiring sprees in regions such as Asia and countries such as Brazil, which tells you a bit about where the bank's priorities lie.
Chasing HSBC's business, in other words, would be a pointless exercise. The debate around the ring-fencing of retail banking, so febrile in Britain's banking sector in the run-up to the ICB's final report, is marginal in the context of HSBC's global footprint – it has, in any case, a blueprint for making the proposals work.
Remember also that the UK is not the only jurisdiction in which HSBC is facing regulatory reform. In fact, the Basel III reforms currently under discussion, which apply to large banks right around the world, are potentially moresignificant for Mr Gulliver and his colleagues. That's presumably why Douglas Flint, his chairman, chose to sound the alarm bells here too yesterday.
Broadly, Mr Flint's point is that now might not be the best time to impose new capital constraints on the world's largest banks – because it would require them to de-leverage further, just as the global economy is also trying to cope with sovereign debt crises and fiscal austerity in so many countries.
One can see what he is getting at, but there will always be areason not to impose necessary reforms. And the more time that elapses following the financialcrisis that got us here in the first place, the slimmer the chances of co-ordinated action worldwide as memories dim.
The straightforward riposte to Mr Gulliver is that HSBC needs to spend some time putting its own house in order, rather than worrying about what regulators are up to. But the bank's new chief executive knows that – it is why he has spent his first six months in charge working out how to take the axe to the excesses that seem to have characterised the final years of the previous regime. It would be unfair to expect him to make too much noise about that.
Shock news: pension finances are improving
Good news and bad on the pension deficits of Britain's largest companies. The bad is that the pension schemes of the constituents of the FTSE 100 Index are £19bn short of the assets they need to meet their liabilities. On the plus side, that's down from £51bn only a year ago. At this rate of improvement, the problem will be wiped out before Christmas.
It doesn't quite work like that, of course. One reason for the big improvement was the Government's decision to move from RPI to CPI inflation as the default pension indexation reference point, a one-off positive effect. Another was that several companies have made very large top-up payments to their schemes over the past 12 months.
Still, the most important factor of all has been a strong performance from the assets in which final salary pension schemes invest, including stability in the bond markets, which has improved the valuation of liabilities. That may change over the next 12 months, but the lesson to take from these figures is that pension scheme deficits can be hugely volatile, in exactly the same way as the assets they hold.
That's crucial in the context of the debate about the affordability of pensions provision in both the public and the private sector. We often see huge numbers quoted in support of either side of the debate about reform, but these statistics provide only a snapshot of the finances of pension schemes at a given moment – and a backwards-looking snapshot at that.
These latest statistics suggest that in the private sector, scheme deficits are still a problem, which is one reason why we have continued to see plan closures over the past few months. But they also show that legislative changes and improving market conditions can have a dramatic effect on a plan's financial position. The case for the revamp of public sector pensions is more finely nuanced than first sight might suggest.Reuse content