HSBC keeps headquarters in the UK after board rejects move to Hong Kong

HSBC
Getty Images

HSBC has decided to keep its headquarters in Britain, the bank said on Sunday, following a review into a potential move that could have shifted the group's base to Hong Kong.

The unanimous decision by HSBC's board gives a boost to London's status as a global financial centre, which has faced challenges from tougher regulation since the financial crisis as well as rising costs.

"London is one of the world's leading international financial centers and home to a large pool of highly skilled, international talent," Europe's biggest bank said in a statement following a meeting in the British capital. "It remains therefore ideally positioned to be the home base for a global financial institution such as HSBC".

Gyrations in Chinese markets coupled with concerns about China's increasing influence over Hong Kong and its independent status meant it was seen as increasingly likely in recent months that the bank would stick in London.

"No surprise," said Hugh Young, managing director of Aberdeen Asset Management Asia, one of the bank's biggest shareholders.

HSBC stressed that while it was keeping its UK base, it remained committed to its Asia "Pivot" strategy under which it plans to invest more into China's Pearl River Delta region and Southeast Asia.

"Having our headquarters in the UK and our significant business in Asia Pacific delivers the best of both worlds to our stakeholders," chief executive Stuart Gulliver said in the statement.

Tumultuous times

The decision comes at the end of a tumultuous week for European banks, whose shares have tumbled on fears of a global economic slowdown and the impact on earnings from a prolonged period of low or negative interest rates.

HSBC shares have fallen around 18 percent since the start of the year and are down more than 30 percent from last April when the group began the review of where to base its headquarters, hit by China's flagging economic growth and its ongoing market turmoil.

Investors in HSBC had encouraged the bank to consider leaving Britain, partly because of a tax on banks' global balance sheets brought in after the 2007-2009 financial crisis.

HSBC Board : Not necessary to review HQ every three years
Why HSBC considered moving its HQ   

But in July, Britain scaled back the tax, as part of efforts by finance minister George Osborne to help to keep Britain a "highly attractive" place for banks.

That removed one of the major disadvantages of having a London headquarters, and a Reuters analysis in January showed that moving to Hong Kong might have actually increased the bank's tax burden.

HSBC, which moved from Hong Kong to London in 1993 when it bought Midland Bank, considered several possible cities to re-base to, including Toronto and Paris. In the later stages of the review, HSBC said it was looking purely at Britain and Hong Kong.

Analysts estimated the cost of moving would be between $1.5 billion and $2.5 billion.

HSBC said it will end its policy of reviewing where its headquarters should be every three years, and will only do so if there is "a material change in circumstances."

Follow CNBC International on Twitter and Facebook.