July 1, 1997 was an inauspicious day for HSBC, marking the end of the congruence of its national sovereign and its domestic market in Hong Kong. The UK government no longer had its back and the bank risked becoming a colonial relic.
Sir William Purves had foreseen the risk and sought by way of compensation international expansion of the group, starting in 1992 with the acquisition of Midland Bank. The policy was intensified by chairman Sir John Bond between 1998 and 2006 under the banner of “The World’s Local Bank”.
The failure of these policies was underscored in the 2008 financial crisis. Today, HSBC remains dependent on Asia for most of its profits.To add to its woes, UK regulators have suspended the payment of dividends to shareholders and the group has been caught in the mounting hostilities between China and the United States. In summary, the UK government is able to do HSBC considerable harm but little good. It has offered no diplomatic or political support for the group in its recent difficulties.HSBC requires a new strategy. Further cutting costs, as proposed by CEO Noel Quinn, is probably essential and may well improve return on equity. However, it neither resolves the challenges of HSBC’s colonial weakness nor provides a promise of future growth.
HSBC doubles down on Asia in massive staffing overhaul
Apart from inertia, there is no reason for the headquarters and board of HSBC to remain in the United Kingdom. They are stationed on the wrong continent and, while the holdings board members are exceptionally distinguished, Asian talent is under-represented.
Such a move has previously been considered and rejected by the board, but in the present circumstances it is time to choose. To remain headquartered 9,600 kilometres from your core business in a continent you claim to see as key to your future is nonsensical.
Such a move will not guarantee a golden future. That will depend on the skill and judgment of HSBC’s leaders and staff. But with the headquarters in Asia, at least the group’s commitment to the continent will be seen as more than complacent lip service. It’s time for HSBC to return home.