A week on Monday, the commission - led by Oxford economist Sir John Vickers - will publish its interim recommendations on how to reform the banking sector – which may include forcing them to hold separate capital pools for their retail and investment banking arms. And it's fair to say that the industry is nervous; indeed, HSBC chairman Douglas Flint told an audience of City bods recently that the bank worried ‘a lot’ about the direction of British financial regulation, suggesting that the UK had five or six months to clarify its position before it started losing business to rival financial centres. The bank also denied reports that it was planning to relocate Hong Kong.
It's pretty clear what's happening here. The industry is trying to heap the pressure on the UK Government as it tries to walk the tight-rope between placating public opinion and keeping the banks onside. A vocal majority wants the banks reined in so they won't be able to repeat their past excesses. But the banks' argument is that if things get too hairy, they'll just up sticks and take their tax generation and employment elsewhere.
Is this an empty threat? It's hard to say. But it seems pretty clear that other countries are keen for more of their business. As for Paris, HSBC already has a sizeable footprint there - including its government-bond trading wing, which it moved over from London a few years ago. Thanks to its ownership of French lender Crédit Commercial de France, it's already one of the largest foreign banks operating in the country. And there's plenty of talent there (Jerome Kerviel, for instance). So it's not totally implausible.
However, we're still not convinced we buy it. Hong Kong maybe, given the importance of its Far East business. But even if Sarkozy succeeds in creating a lighter-touch regulatory regime, does HSBC really want to be headquartered in a place where staff won't work more than 35 hours a week, retire in their mid-thirties on a full pension, and insist on a two-hour lunch break for steak frites and Gauloises? It'll never happen....