Why is HSBC really keeping its global headquarters in the UK?

HSBC’s 19-man board voted unanimously to keep its headquarters in London

HSBC was originally headquartered in Hong Kong until a move to London in 1992 (Getty)

What’s happened?

HSBC has said it will keep its headquarters in the UK after a 10-month review into whether its should move its base.

Europe’s biggest bank was said to be considering a move because of stricter banking rules in Europe following the financial crisis in 2008.

But after the review – and the loosening of some of new rules for banks - HSBC’s 19-man board voted unanimously to keep their headquarters in London.

Where would they go?

The most likely location was thought to be Hong Kong, where the bank earns much of its profits.

HSBC was originally headquartered in Hong Kong until a move to London in 1992.

Why were they considering it in the first place?

In April, HSBC didn’t mention that it was worried about the banking levy, which taxes bank’s global balance sheets, but focussed on rules requiring the UK’s banks to “ring-fence” their investment and trading activities from their consumer services.

HSBC chairman Douglas Flint said to investors:

“We also have to take fully into account the repositioning of our industry being driven by the regulatory and structural reforms which have been put in place post crisis. We are beginning to see the final shape of regulation and of structural reform, including the requirement to ring fence in the UK.”

Why is HSBC staying?

HSBC did talk about the banking levy when it made the decision to stay.

“I think what was important was that the Government changed the scope of the levy,” Douglas Flint, HSBC chairman, told the BBC.

In June, George Osborne said that the levy on worldwide banking assets would be reduced over six years and stop applying from 2021. HSBC have a relatively small portion of their assets in the UK but were paying £1 billion a year in levy charges.

So they reached an agreement with the Government?

Flint denied that HSBC had forced the Government’s hand.

“We had no negotiations with the government. The government was very well aware of our view, indeed of the view of many other people who commented upon it, but there certainly was no pressure put, or negotiation,” he said.

But analysts said they wouldn’t be surprised if some negotiations had taken place.

David Buik from Panmure Gordon said: “I get the impression that there have been some sensible conversations with George Osborne, the Treasury, BOE and the FCA. There clearly has been some softening of approach by the authorities in their attitude to HSBC.”

Well, what else could it be?

HSBC could also have been put off by Beijing’s growing influence on Hong Kong – including the worrying detention of Hong Kong booksellers.

A month ago, an HSBC “insider” told Reuters: “The situation in Hong Kong appears to be getting worse. You have to wonder if the city will remain a suitable base for an independent-minded, top global financial institution.”

What does it mean for George Osborne and the Treasury?

“This is a relief for the chancellor,” Gregor Irwin, a former Treasury official and now chief economist at Global Counsel, a London-based consultancy, told Bloomberg.

“It would have led to questions about his judgment had they left.”

In a statement, the Treasury celebrated HSBC's decision: “It’s a vote of confidence in the government’s economic plan and a boost to our goal of making the UK a great place to do more business with China and the rest of Asia.”