How the world re-balances itself. The news this morning that Michael Geoghegan, chief executive of HSBC, is to move to Hong Kong, leaving the bank to be represented in London by Stephen Green, its chairman, reminded me of why HSBC put its chief executive in London in the first place.
HSBC, of course, once rejoiced in its full name – the Hong Kong and Shanghai Banking Corporation – which I regret that it dropped since it was one of the great names in finance. When it took over Midland Bank in 1992, it was told by the Bank of England that it had to move its headquarters to London.
HSBC, a bank run by Scottish expatriates who worked in Hong Kong when it was part of the British empire, did not like that very much but it was forced to comply.
Now, 17 years later, and presumably with the approval of the Financial Services Authority, it is reasserting the arrangement it wanted in the first place – to run the bank from the expanding Asian markets and treats its UK subsidiary as just that.
To remind myself of all this, I looked back at the FT stories from the time, written by Robert Peston, my former colleague and now BBC business editor, and found something else interesting. This is from one story that he wrote in March 1992:
As for the Bank of England, it will examine any takeover proposals carefully, although it is expected to give its approval. The Bank’s primary aim is to protect the interests of Midland’s depositors. So it will seek guarantees that Midland’s deposits will not be used to make loans in the colony – just in case there is an economic calamity in Hong Kong after 1997 when it reverts to Chinese rule.
Ho, ho, ho is all one can say with hindsight. Not only was there no economic calamity but Hong Kong has been the model for China’s extraordinary growth since then.
However, the notion of ringfencing UK deposits to make sure they are not used for risky lending in far-off places is back in fashion as a way of handling future bank collapses. The difference is that the country from which UK depositors are supposed to be protected is the US, not China.
