Global banks considering moving their headquarters out of the U.K. won’t gain easier regulatory treatment if they wish to retain access to major developed markets, Bank of England Governor Mark Carney said.
The world’s biggest banks need to be able to demonstrate that they’re stable and well run to be allowed to do business in the U.K., the U.S. and other major markets, Carney told reporters after the BOE presented its Financial Stability Report on Wednesday. They also need to show they can be wound up safely if the need arises, he said.
“It’s not like you can have a compensation scheme or a governance structure that doesn’t meet international best standards and expect the same access to those markets, as you would if you met global standards,” Carney said. “So it’s better to meet those global standards early in a strong, competitive system that acts with integrity, than to try to delay it and end up meeting them in the end.”
Spurred on by rising tax and regulatory costs in the U.K., HSBC Holdings Plc, Europe’s biggest bank, and Standard Chartered Plc, which operates mainly in emerging markets, are weighing whether to move their bases abroad.
HSBC, whose Chief Executive Officer Stuart Gulliver views Hong Kong as his permanent home, is heaviest hit by the U.K. levy on lenders’ balance sheets, paying 750 million pounds ($1.2 billion) in 2014. Standard Chartered is under pressure from investors to move to Asia, with Finance Director Andy Halford saying in April that changing domicile is “something that we continue to keep under review.”
‘Forefront of Design’
The regulatory demands the U.K. makes of the banks are a function of the nation’s importance in financial services and of the industry’s size relative to the U.K. economy, Carney said. Regulation helps make the banks more competitive, he said.
“As the leading financial center, as one of the largest banking systems in the world, it shouldn’t surprise that we’re more towards the forefront of design and implementation of measures both for banks and markets,” he said. “But these are building blocks of competitiveness.”
Major banks must also have plans that if necessary will allow regulators to wind them up without bringing down the financial system, he said. Without those, they may not be allowed to do business in the biggest markets, he said.
“If you’re a global bank, a global institution, it’s not like you can go to some other jurisdiction and not have a credible resolution plan and think you’re going to operate in the United Kingdom or the United States or the euro area,” he said. “It just won’t happen.”