HSBC non-dividend officials cannot just "understand"

01 point of view

Written by: Review Editor

2020-04-07 16:30

HSBC (0005) canceled the fourth quarter of 2019 dividend payment at the request of the Bank of England, and all Hong Kong shareholders were affected. Many people who live on retirement with dividends face financial difficulties, and even smaller shareholders are planning to organize alliances to "protect rights." The non-dividend turmoil reflects a deeper problem: a bank whose profit is mainly in Hong Kong, because its place of registration is in the United Kingdom, has made British supervision over local supervision. In this regard, Hong Kong's financial officials should actively exert pressure, and even promote the relocation of HSBC to Hong Kong. However, officials have been slow to express their views on this. During the special meeting of the Finance Committee of the Legislative Council on Monday (6th), the Secretary for Financial Affairs and the Treasury, Liu Yixiang, showed even more negative attitudes in response to questions about HSBC, which was really disappointing.

The focus is on the power of supervision

The fact that HSBC does not pay dividends has caused widespread discussion. Shareholders whose interests have been hurt certainly object, but there are opinions that the dividend payment is not an "old offer". The company's decision to pay dividends is only a business decision, and it does not violate legal issues and does not require much fuss. At the same time, some people think that HSBC is only required by the Bank of England. The mistake is not HSBC, and the fact that it does not pay dividends is just an accident affected by the epidemic. There is no need to raise it to the discussion of relocation.

But in fact, the core issue of HSBC's non-dividend payout is not whether the dividend is paid or whether it is a short-term measure, but the problem of outside supervision. The main business and profit of HSBC are in Hong Kong and Asia. According to HSBC's 2019 annual report, 49% of its accounting benchmark income comes from Asia, and only 29% in Europe; in terms of profit, Hong Kong alone brings HSBC's pre-tax profit of 12.049 billion US dollars, which is its UK Banking business is more than ten times. Nonetheless, since the decision of the Bank of England can override Hong Kong's regulatory authority, it is very unreasonable.

The last time HSBC reviewed the relocation was in 2016. (Getty)

Therefore, the issue of the exchange control incident is not whether it violates the law, or whether it is just an accident, but the structural issue of the decentralization of supervisory power. Although not paying dividends may just be a decision made in response to the epidemic situation, the problem of decentralization of supervisory power is a long-standing problem. If similar incidents occur again in the future, similar situations will occur, so Hong Kong must find ways to fill this problem. Among them, the most effective way to solve the problem is to let HSBC relocate the book to Hong Kong. Even if there are any problems in the future, the Hong Kong mechanism should judge whether it is reasonable.

Officials do n’t see it as a structural issue

However, when Liu Yixiang responded to questions in the Legislative Council, he only explained that the cancellation of dividends by Bai Hukong would affect investors, but the problem stems from the Bank of England, the HKMA has kept in touch with it, and will not comment on individual cases publicly. This fully reflects that Hong Kong's financial officials' perception of the issue of currency control seems to be limited to the short-term impact of non-dividend payouts, while ignoring the structural issues of the decentralization of supervisory powers.

Officials must understand that the issue of exchange control is not just a free market issue, but that Hong Kong must regain control. Even if it does not necessarily involve legal issues, it should not allow HSBC to continue to sacrifice the interests of Hong Kong people. Officials must show their courage and use more rigorous means to pressure, rather than just "keep in touch." HSBC is one of the financial banks of the Hong Kong government, which has brought many benefits to HSBC. Since the Hong Kong government itself is the "big guest" of HSBC, this alone can already put some pressure on HSBC. Officials should recognize the importance of the issue, and actively induce HSBC to relocate, or switch to other Hong Kong-based banks instead of waiting for them.

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