Going local

HSBC: HSBC’s heart is in the right place. The lender is relocating its chief executive to Hong Kong, taking him closer to the region where most of its opportunities and challenges lie. The rest of the top team stay put. Some will say HSBC should have been more radical, some will say less.

Shipping Mike Geoghegan to the Fragrant Harbour makes sense, given the dynamics of HSBC’s business. True, assets and pre-tax profits are still mainly European. But HSBC's strongest growth market is undoubtedly China. So the lender is right to move its assets, notably people, to where they can create most value for customers and therefore shareholders. That’s probably Hong Kong.

But the transition will be a test of the idea that we live in an increasingly small world. The executive chairman, Stephen Green, will remain in London, where HSBC is domiciled. That reflects his role’s focus on dealing with shareholders and the bank's primary regulator. HSBC’s finance director and head of investment banking are also staying in the UK. Something is likely to be lost with fewer opportunities for face-to-face contact between Geoghegan and his senior managers.

Indeed, with Geoghegan out of the picture in London, the move somewhat reinforces the “executive” in Green’s title. Shareholders might have preferred HSBC to flag a weakening of the role and a shift to a purely non-executive position.

These gripes may not matter for long. Geoghegan’s move looks like another baby-step towards an inevitable eastward shift in HSBC’s business. The bank has already issued a renminbi-denominated bond, and has applied for a listing in Shanghai in an attempt to appear more local. As income, assets and the investor base become more Asian, more of the senior team will be packing their trunks. Until then, HSBC needs to show that the halfway house is worth its flaws.