HSBC: going nowhere

Gulliver, my good fellow, fetch the sabres and give them the usual rattle. Perhaps not quite the order barked across the boardroom at HSBC chief executive Stuart Gulliver, but a fair depiction of the bank's strategy as it ponders anew whether to abandon the UK's politico-regulatory quagmire and move its headquarters from London.

Chairman Douglas Flint's statement at the bank's shareholder meeting says only that management has been asked to look at the best place for its HQ. It is easily taken as a hint of a move back to Hong Kong. The decision should not, however, be based on sheer despair at post-crisis regulation, or the UK bank levy, which falls disproportionately on HSBC, with less than half of its assets in the Europe. Rather, it should turn on the interests of its customers and investors. If those lead to Hong Kong, or elsewhere in Asia, so be it.

The UK and its other western markets are mature. Not so HSBC's Asian network that radiates from Hong Kong. The region contributed four-fifths of its pre-tax profits last year. But it can serve Asian clients well wherever its HQ is. Operationally, it hardly matters where HSBC is based.

Domicile, on the other hand, matters plenty. It dictates regulation and tax. Watchdogs in Asia like the fact that HSBC is regulated in the UK (this may be unwise, given the legacy of light-touch UK regulation, but that is not the point). Regulators around the globe may feel less comfortable if, say, Beijing were the bank's supervisor.

And HSBC investors - three-quarters of them in the US and UK - might balk at owning a Chinese bank should HSBC go home. The fact that China is not a democracy will affect the balance of risk and return. The regulatory and tax benefits must be demonstrably durable to justify a move.

Think about it, by all means, but put away the sabres. HSBC is going nowhere. The priority right now is to make sure that the lumbering bank is not too complex to manage.

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