Brexit fears lead to hike in UK foreign currency accounts

Demand for accounts offered in 14 currencies – dominated by dollars and euros – jump as UK account-holders seek shelter from political fallout of Brexit vote

Brexit fears prompted a surge in take-up for HSBC Foreign Currency accounts (Reuters)

HSBC isn’t plastering Heathrow with its “world’s local bank” tagline anymore, but a Brexit-battered pound and a political swing to the left have spurred internationally minded customers in the UK to snap up its foreign-currency accounts.

Demand for HSBC Currency Accounts, which lets customers hold cash in foreign currencies in the UK, spiked 23 per cent in June from the previous month, spokesman Ankit Patel says.

Theresa May had been expected to win June’s General Election easily but it resulted in a minority Conservative government after a surprising surge by the Labour Party under Jeremy Corbyn, who has pledged more state intervention and vowed to tax higher earners more heavily. He has since overtaken Mrs May in opinion polls.

“Having seen the calamitous falls you saw immediately post-Brexit [referendum], people have woken up to the fact that they have currency risk,” says Rob Burgeman, an investment manager at Brewin Dolphin, which advises high-net-worth individuals. He added as the election loomed, people thought, “we could have Prime Minister Corbyn here this time next month.

“It just focused people’s minds on currency risk and political risk: you’re not going to catch us like that again.”

HSBC currency accounts are offered in 14 currencies, with the vast majority of customers choosing dollars or euros. Year-on-year, the number of new accounts was 5 per cent higher in the first seven months of 2017, says Patel. The year-earlier period includes 23 June 2016: on that day, voters shocked pollsters and financial markets by voting to leave the EU, prompting the pound to plunge to multi-decade lows against the dollar.

Unlike the other big UK consumer banks, HSBC operates extensive retail networks abroad, and targets customers with international needs through the HSBC currency accounts and a “global view” product to manage accounts based in other countries. Barclays also offers foreign-currency accounts, but declined to provide figures on recent demand. UK-centric Lloyds said the number of new foreign-currency accounts is little changed.

HSBC says 57 per cent of the people who have currency accounts are British. Many of the rest were opened by UK-resident foreign nationals, possibly Americans: the bank says there was a surge in demand for accounts around the US presidential election last fall. The Dollar Index, a measure of the greenback’s strength against other major currencies, rose 7 per cent in the last five months of 2016.

“We see an increase in demand during election periods, because the uncertainty means customers begin to look at the potential impacts on their wealth and how they can minimise this risk,” HSBC has said in a statement in response to questions.

More than 80 per cent of HSBC currency accounts are in dollars or euros. Patel points to a rush into dollar accounts between August and December 2016. He adds dollar currency accounts at the bank jumped to 41 per cent from 35 per cent in that period.

Bloomberg