Why the HSBC headquarters stayed in London? All about location, location, location

Prof. Richard Grossman in his post writes on the location choice made by HSBC. There is a bit of history about the bank as well..

HSBC had been officially considering the move to Hong Kong for almost a year before it decided to stay put. As a healthy and relatively profitable bank, the British government was keen for it to remain in London. So keen, in fact, that recent government moves could be interpreted as an attempt to … convince (bribe is such an unpleasant term) HSBC and other multinational banks to remain in London.

Britain’s Chancellor of the Exchequer (i.e., finance minister), George Osborne, made it clear during his Mansion House speech in June 2015, that he was prepared to make life more comfortable for banks to stay in the UK, offering a “new settlement” to Britain’s financial industry. “I want Britain to be the best place for European and global bank HQs. It’s in our national interest to be so.” And so the government will reduce a special tax that had been imposed on banks in the wake of the financial crisis. He also signaled that the substantial fines that had been imposed on banks for bad behavior would be used more sparingly: “… simply ratcheting up ever-larger fines that just penalise shareholders, erode capital reserves and diminish the lending potential of the economy is not, in the end, a long term answer.”

The HSBC board, which voted unanimously to keep its headquarters in London, understood that moving to a more economically dynamic Hong Kong would subject it to China’s not-yet-ready-for-prime-time economic institutions. Still, the threat of the move encouraged the British government to make life cozier for its banks.

The Chancellor was taking no chances.

And neither was HSBC.

Hmm.. Location is hardly a topic for discussion in banking/finance. But it is all so interesting, After all banks eventually concentrate in a very few places. What is behind this concentration?



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