Barclays, Standard Chartered and HSBC Holdings, three of Britain’s biggest lenders, are toning down threats they made last year to leave London as pressure to break up commercial and investment banking eases.
Barclays Chief Executive Officer Robert Diamond told UK lawmakers last month that London remains the “premier financial centre in the world.” HSBC Chairman Douglas Flint listed its advantages over rivals. Mike Rees, Standard Chartered’s head of corporate banking, praised the city’s “great neutrality”. Five months ago, the three banks warned that any attempt by the UK to force their breakup risked triggering an exodus.
The change in tone was prompted by the UK’s Independent Commission on Banking, which was asked by the government to consider splitting bank’s consumer and investment units. John Vickers, the commission’s Chairman, said in a January 22 speech he wouldn’t recommend a breakup. Six days later, Prime Minister David Cameron said the UK shouldn’t take “revenge” on the banks and pledged a more “balanced” approach on bonuses.
“The mood music has definitely changed and become more conciliatory in recent weeks,” said Ian Gordon, a banking analyst at Exane BNP Paribas in London. “The shift in tone suggests we’re getting past the greatest excesses of the brinkmanship and moving towards the end game.”
HSBC, Europe’s biggest bank, and Standard Chartered make a majority of pretax profit outside the UK. Barclays earned two thirds of its first-half profit in 2010 from its investment banking unit, which includes the former North American unit of Lehman Brothers Holdings. The United Kingdom government is the biggest shareholder in Royal Bank of Scotland Group and Lloyds Banking Group, the country’s two remaining top-five banks.
The tax and regulatory complexities of moving, coupled with the challenge of choosing a new base without offending other cities and governments makes it very difficult to move a bank’s headquarters, Standard Chartered’s Rees said in an interview at the World Economic Forum in Davos, Switzerland.
“You can’t just uplift a company on a whim, that’s a huge thing to do,” Rees said. “Think of the destruction you put through your shareholding. Think of the disruption from a management point of view.”
A move elsewhere would also spark adverse reactions from the losers, Rees said.