Two big investors in Standard Chartered want the group to consider switching its domicile away from London because of the chancellor’s decision to increase the UK bank levy by a third.
One top 10 investor in Standard Chartered said: “The increase in the bank levy may make it sensible to move. We want the company to look at this. Moving headquarters is not easy and it may not be worth it, but this should be considered.”
He said the board had discussed the issue of moving in the past and decided against it. StanChart declined to comment.
On Thursday, bank insiders said StanChart was already one of the most heavily taxed UK companies, paying 9 per cent of pre-tax profits to the bank levy last year.
Bill Winters was this month unveiled as the incoming chief executive of StanChart, replacing Peter Sands in June, and investors are pressing the former JPMorgan executive to make it a priority to reconsider the UK domicile.
A top 20 investor in the bank said: “This is a big hit for Standard Chartered. The bank would need to weigh up how much it would cost to switch domiciles, but it is looking more like a possible option.”
The top 20 investor said Hong Kong might prove a more obvious place to be headquartered than Singapore, but it depended on costs, which only the bank could evaluate. The bank has a dual primary listing in London and Hong Kong.
The UK regulator has been increasing the capital StanChart is required to hold to similar levels as its rivals in Asia, eroding what was once seen as an advantage for banks to be based in Britain.
StanChart paid $366m towards the UK bank levy last year — an increase of more than 50 per cent on the previous year. After the government announced a one-third increase in the bank levy in this week’s Budget, the amount it pays is likely to jump again this year, which insiders say may make it harder to justify staying in the UK.
The levy is particularly painful for StanChart because, unlike the other UK lenders it does not have any high street branches in the country and so does not benefit from the state deposit protection scheme. HSBC is the biggest contributor to the bank levy, but it has a large UK retail and commercial bank, making it harder to move its domicile to Asia.
The tax, branded “a location levy” by British lenders, is charged as a percentage of total global liabilities, which in StanChart’s case are mostly outside the UK.
Most of the bank’s 86,000-plus workforce are based in Asia, the Middle East and Africa, but its headquarters and top managers are in London.
A further drawback of being UK based is that StanChart is subject to Europe’s new bonus cap, which limits variable pay to double fixed pay and could give its Asian rivals an advantage in hiring people.
When the StanChart board has previously discussed the issue, it decided to maintain the status quo, not least because there are doubts that either Hong Kong or Singapore would welcome responsibility for a bank with a $725bn balance sheet.
Financial Times
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