Business Strategies: HSBC heads home

The terms included that HSBC must relocate its head office to the UK, and become primarily regulated in the UK.

At the time, UK regulators were, if not actively hostile to China, certainly disparaging of its regulatory regime.

For example, a Chinese bank was refused a licence in the UK, the grounds being given that the UK could not ensure that China would stand behind its bank if it got into trouble.

That argument rang very hollow as the British government shortly afterwards walked away from providing support for Barings. And in the recent crisis, it has not been China that has shied away from supporting its banks: it has been European countries and - with 95 closed in the USA this year, the record there is looking shaky, too.

So, with China due to take over Hong Kong and the UK being wary of what would happen to the Hong Kong regulatory regime, the UK government acting through its regulators demanded that HSBC move its headquarters from Hong Kong to London.

And it did - although the move was not entirely happy as, in 1999, their headquarters were so severely damaged by an IRA bomb that they had to move out.

HSBC moved into a tower in Canary Wharf, across the street from Citi and a few paces away from the new unified regulator the Financial Services Authority.

It's the Financial Services Authority who have had to deal with HSBC's decision that its Chief Executive will, from next month, be based in Hong Kong.

To deny HSBC the right to relocate Michael Geoghegan would be to imply that the Hong Kong Monetary Authority is not a competent - in Whitehall terms a "reliable" regulator.

HSBC is not relocating its domicile (and so will continue to be subject to the UK's penal tax regime ) nor its official headquarters.

At least, one suspects, not yet.

When the management team was told that, if it wanted Midland it had to move to the UK, some were sanguine, most were miserable. Not only did their persona taxes more than double overnight, but so did their costs of living, with the added complexity of UK labour laws applicable to domestic help - in Hong Kong, an amah or maid is normal for working families and is not a status symbol. In the UK, finding a decent housekeeper is next to impossible.

And there were similar implications for the company.

Michael Geoghegan's move is not tax driven. He is going to HK for the simple reason that that's where the business is. This decision carries deep implications for many other businesses.

The reality is that HSBC has formed the view that the GMT timezone is not the most efficient for its global management given the development of global financial services.

How many other businesses are about to set their corporate clocks to GMT +8?