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The chief executive of HSBC quit London for Hong Kong today in a devastating blow to the capital.
Michael Geoghegan will move from the HSBC tower in Canary Wharf to Hong Kong in February 2010.
Geoghegan said it was necessary as the bank deals with “the shift in the world's centre of economic gravity from West to East”.
Speaking to the Evening Standard from Hong Kong today, he said: “West is moving East, and we want to be at the forefront of that.
“Asia is our biggest business and China is our number one priority. To drive the business, you have to be here. Hong Kong is the gateway to China.”
HSBC insisted it will keep its offices in London, will continue to pay UK taxes and will still be regulated by the Financial Services Authority.
Chairman Stephen Green, who will remain in London with finance director Douglas Flint, said: “There is absolutely no question of HSBC pulling away from London.”
The deeply symbolic move stunned bank staff and was seen as a threat to London's status as a global financial powerhouse.
Analysts said it was only a matter of time before HSBC shifted more of its top brass to Hong Kong or relocated there altogether.
James Hamilton of Numis Securities said: “When HSBC plan for the next five, 10 or 20 years they will see Asia is going to be the biggest driver of their growth. Senior management should be focused on developing that.”
David Buik of BGC Partners said: “It just goes to show how much credence and importance HSBC attaches to China and Asia.”
China and Hong Kong accounted for 40% of HSBC profits in the first half of the year and analysts reckon it could reach 50% in five to 10 years.
The shock move by HSBC sparked speculation that other banks, such as Standard Chartered, might follow as London slips down the global pecking order in the wake of the financial crisis.
Geoghegan's move — which will also see him avoid the 50% top tax rate being introduced in the UK — triggered a shake-up across the top of HSBC and fired the starting gun on the race to be his successor.
Among the favourites are Sandy Flockhart, previously head of the bank's Asian operations, who becomes HSBC's global head of retail and commercial banking, also based in Hong Kong.
Stuart Gulliver, another potential contender who runs HSBC's global banking and markets and asset management operations, will take charge of private banking and insurance, as well as becoming chairman of Europe and the Middle East.
Reader views (24)
William, London
I made reference to the tax rates that Mr Geoghegan will pay in H.K. as a matter of comment. I dont think for one moment that was his criteria for the move, nor do I think he actually paid 47-50% in tax to the UK government. What are accountants for... But it certainly is a nice bonus.
(The difference of 15% to 50% I'm sure is more than I earn.)
I was in H.K. during the run up to the takeover, H.K. was awash with money and there were fears as to what to do with it since it went with back the territory. The new airport was one way of trying to get rid of some of it.
Sir Edward Yeude died suddenly on a trip to Beijing, he would have steered H.K. through those difficult last years I think with success. He was thoroughly familiar with the Chinese, spoke the language, and knew how to negotiate with them. He was replaced by Chris Patten who made an absolute mess of relations with China with talk of democratic reforms and a lot of argy bargy no doubt from Mrs Thatcher.
There was fear, and indeed some panic, amongst the population and business all round.
Patton was just not helping.
The move of HSBC to the U.K. was part of it. This left The Hang Seng Bank as the bank. HSBC was the first bank in H.K. and has inevitably and rightfully returned to resume that position. For me that is nice to see. It's future is China and H.K. and it is right.
- W.Palmer, North Vancouver, Canada, 28/09/2009 19:59
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It is very interesting to read the posts of all of those - such as W Palmer of Canada - who suggest that the Mr Georghegan is moving to Hong Kong simply because of the tax rates there. The trouble is that the facts laid out in the article simply do not support it, although I suspect that most of those expressing similar sentiments care more about the rhetoric than the actuality.
For a start most have forgotten about Nat Ins, so we are talking about a proposed rate tax rate of 51% compared with the 16% quoted by W Palmer (though I believe that for 2008/09 HK may have reduced the rate to 15%). But even today's rate of 41% is still 27% higher than pre 2008/09.
If Mr Geoghegan was so worried about tax why did he stay in this awful 'socialist' country and volunteer to pay all that extra tax for years on end. Clearly he cannot have been very clever - in fact, judging from some posts, he must be as dumb as they come.
Worse still, the Chairman and Finance Director of HSBC along with the head office staff and traders are choosing to stay and pay 51% tax. HOW STUPID ARE THEY?! Obviously, such moronic people should not be in charge of a major bank. THEY SHOULD BE FIRED IMMEDIATELY.
What we want are proper bankers, that is ones who seek to pay the lowest tax possible, indulge in reckless risk, wreck their banks, and have to be bailed out by the taxpayer. These twits at HSBC are just not up to the job. We should replace them with Goodwin, Applegarth and Crossby.
- William, London, 28/09/2009 13:44
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Good look to him, if i had the money i too would leave this God forsaken country.
- Stan White, leeds, 28/09/2009 08:30
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The big economic Nu Labor programme from Crash Gordon is... crashing. The rest of the world is growing again. Here our Nu Labor economic geniuses are increasing taxes and rules and other bureaucracy...
- Georgie, Islington, London, 28/09/2009 08:11
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Banks used to be an aid and an asset to the capitalist system, now they're just a millstone round our necks. Nationalising banks would be a grave error, but restricting their greedy CEO's and executives salaries and bonuses to a proven profit and shareholder returns regime would go a long way resolving the problems.
- Len, Perth Australia, 28/09/2009 04:03
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From 50% tax to 16% flat tax in Hong Kong... Yeah who would blame him. Someone has to give this tax thing some more thought. The present model is not going to work. Didn't we go through all this with Chairman Wilson? another red assed Socialist....
I lived and worked in H.K. for several years, I saw the old HSBC building knocked down and the new HSBC building built, and then the bank moved to the U.K., and now moved back to its rightful place H.K. the gateway to China.
This is China's century. HSBC has to be there. ....wish I was....
- W.Palmer, North Vancouver, Canada, 27/09/2009 22:10
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William, London.
You are spot on with your post.
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I would only add this; why did Gordon Brown not put all our money in one brand new bank; and call it the British Taxpayers Bank, with all savings of investors guaranteed by the British Nation in full etc.
I think a Bank of the British People; would have taken all the business off all other banks in the UK; and overnight etc.
OK the Banks are still there etc; but who can trust them ever again?........Mick.
- Mickinlondon, london, 25/09/2009 16:34
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Indeed, a devastating blow to the capital' Will we survive it? Heaven help us! Decline and Fall! It's all over! Chaos reigns supreme! The end of days! Armageddon! Flee! Flee!
- John Problem, Hackney (UK actually)., 25/09/2009 16:22
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Daar Tax1
Yes, I choose to, and I pay plenty of tax at 50% - but that's because I care about other people less fortunate than myself (and am willing to reduce my wealth in order to help others), and am not a "greed-is-good" person who cares only about No. 1 ... though perhaps that's a bit "unfashionable" these days
- Nick, Battersea, 25/09/2009 16:19
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Didn't the British force HSBC to relocate it's HQ from Hong Kong to London in 1993 as a condition for the Midway Bank takeover? Since they were afraid that British deposits would be loaned out in Asia and the "calamity" that would ensue after 1997 handover to China.
HSBC relocation back to London in 1993 was a serious blow to HK. lol
- Rw, United States, 25/09/2009 16:04
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Mr Geoghegan took home GBP1,070,000 last year.
Quite a nice 40% tax take for the state.
So next year the state will get 50% of nothing instead!
- Joseph Yossarian, London, 25/09/2009 15:47
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Why would any person chose to be taxed at 50% in the UK?
- Tax1, London, 25/09/2009 15:34
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How can the UK seriously promote itself internationally with a 50% tax rate!!!!
This will be the first of many - you watch. And who can blame him?
- James Deen, Southampton, 25/09/2009 15:22
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I agree with Martin Clarke about the name of the bank.
I would suggest however thet Ron Oldham asks those who have lost their jobs since the credit crunch begun whether the city is employment and wealth creating. Given the amount of tax money the banks have been given to stop them failing perhaps he might like to ask why those companies who bleat about paying taxes in the UK didn't refuse to take the money.
He might also like to note that both France and Germany have car industries and that one of the favoured modes of transport for city types is the Porsche produced in Germany.
- Colin, London, 25/09/2009 15:21
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This is just the start, no doubt others will follow. Our government is subjecting the industry to "Bankism", discriminating and deminising financial services sector. Once exodus starts, jobs disappear, unfortunately vast majority of bank staff are hard working middle income people who cannot relocate. Many banks did not participate in reckless trading or engage in excessive bonus or mad party culture. While we all know its Sexist to label and generalise Blondes as Dumb, when will the government understand the damage of persecuting bank will be bourne by us, humble taxpayer.
- Anita, London, 25/09/2009 14:55
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Martin Clarke has it spot on.
Why the obsession with initials? The TSB-Bank (Trustee Savings Bank Bank) is now part of LloydsTSB. The Trustees have long gone with their honesty, veracity and ethics. What a pity that none of these qualities were applied to personal shareholders before the deal with HBOS was brokered. At least HSBC can return to its roots with honesty and integrity intact - when will Lloyds be able to act in similar fashion?
- Roy, Billericay Essex, 25/09/2009 14:41
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Ron Oldham
This may come as a shock to you - and you may have to lie down after hearing it - but the only reason that the City STILL EXISTS is because the UK taxpayer, that is you and me (I assume you are one) gave them a massive bailout and subsidy. Last October, as confirmed by the BOE Governor in recent TV interviews, the whole UK financial system came within a few hours of a complete collapse. If that had occured, inter alia, you would not have been able to use a cash machine, bank accounts would have been frozen, and salaries could not have been paid. A little humility on the City's part, and of its supporters such as you, would not go amiss.
Indeed, had we been handing out subsidies on such a scale to any other industry - and the scale involved in the bank bailout (in inflation adjusted terms) dwarfs any support we gave to the 'old' industries like coal mining - the City would have been screaming about favouritism and proping up 'duds'.
As Martin Clarke wittily put it: for HSBC'S move, the clue is in the title. MDJ says it more extensively: that finance and other services, such as shipping, inexorably move to where major economic activity occurs, such as the Far East and China. London will still be a financial centre even in 50 years but in a diminished role.
Empires, finanical and military, eventually overreach themselves. The denouement may be sudden or extended, but inevitable. It is likely that 2008 was the year the West's financial hegemony ended.
- William, London, 25/09/2009 14:27
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'in a devastating blow to the capital'
hyperbole much? This 'story' is one fairly inconsequential fact (the CEO is moving but all the trading floors, and therefore all the big earners, are staying put) and a hysterical ungrounded assumption. Report more, exaggerate less please.
- James, London, 25/09/2009 14:15
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50% tax a good idea anyone?
- Stephen, London, 25/09/2009 13:48
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As Martin Clarke says, is anyone suprised that the Hong Kong and Shanghai Bank want to be based in Hong Kong?
- Anthony, Esher, Surrey, 25/09/2009 13:26
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This is the start of completion of Gordon Brown and his future employer (the EU) aims.
England and particularly London has to be emancipated so the new Socialist order can rise.
It would appear Gordon has had this as ambition since his University days.
- Ian, Reading, England, 25/09/2009 13:23
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I bank is called Hong Kong and Shanghai Bank Corporation. What did you think H and S stood for Hartlepool and Sunderland.
- Martin Clarke, london, 25/09/2009 13:08
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The first of many prominent financial minds, I fear, to flee London, as the three main parties target with personal taxes and onerous regulations, the wealth creating, employment creating, tax generating City.It will be very difficult to stop this process, aided by populist politicians with little experience of the real world of work, and a spiteful, envious E.U., orchestrated by France and Germany, determined to destroy this world class industry.
- Ron Oldham, London, 25/09/2009 12:56
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Businesses in the long run are bound to relocate closer to their main markets: this is no surprise. The next step of course, will be that the Chinese will within the next decade or so develop their own banking and insurance services. We became No1 shipping insurer because we were No 1 shipping owner and operator, and once the one thing changed, the other is bound to follow. This shows the error in the larger picture of basing an economy on activities that have no intrinsic reason to be in a particular place.
We mustn't cling to the delusion of finance preeminence as we did so long to the lost glories of shipbuilding, or we'll have governments subsidising banks for thirty years, the way we did shipyards in the 70s, before we learn the same old lesson.
- Mdj E10, london uk, 25/09/2009 12:35
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