Outlook I don't want to get back into the debate about whether HSBC needs more capital or not. Morgan Stanley yesterday added itself to the growing list of securities houses to say that it does, but there are still plenty of others who think the bank will be able to trade its way through the recession without resort to shareholders or governments. Whatever the answer, HSBC would be in a much worse position today than it is, with still relatively healthy capital ratios, had it listened to the siren calls a few years ago urging it to repatriate great wadges of capital and pay it out to shareholders. Most other banks succumbed, leaving them hopelessly undercapitalised when the downturn hit. HSBC resisted.
Part of the problem in getting banks to lend again is that internat-ional banking standards require that in a downturn banks hold more cap-ital for the same amount of lending to take account of the higher risks involved. This has to change fast if we are ever to emerge from the present chaos. HSBC provides a reasonably good model of the sort of countercyclical approach to capital that must now be adopted as a matter of urgency.