A Background of HSBC UK

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1. Background of HSBC UK

HSBC bank was formed in March 1865 in Hong Kong, HSBC serve about 54 million customer all over 75 countries and regions (HSBC 2014 (A)). HSBC has served their customer mainly in four regions, which are Asia-Pacific, Europe, Middle East and Americas (HSBC 2013 (A)).

The inspiration of founding the bank was Thomas Sutherland, who working for Peninsular and Oriental Steam Navigation Company. He helped to establish the bank to open in Hong Kong and Shanghai. In 1888, HSBC was the first bank established in Thailand and it printed the country’s first banknotes (HSBC. 2014 (B)).

At the very beginning, HSBC now in UK isn’t HSBC in the past. It was Midland Bank plc in the past. Let talk about how Midland Bank transform to today’s HSBC Bank. In 22 August 1836, Charles Geach founded Midland Bank in Birmingham. In 1851, Midland Bank bought “Stourbridge Old Bank” and it became the Birmingham and Midland Bank’s first branch (HSBC 2013 (B)). In 1889, HSBC’s representation stems back to British Bank of the Middle East and it was established in London. The founder was Baron Julius de Reuter. Today, HSBC is also one of the financial services organization and leading bank (HSBC 2013 (A)). In 1898, Midland bank acquired City Bank Limited. Then became one of the four largest banks in United Kingdom. And so the headquarter transferred to Threadneedle Street (HSBC 2013 (B)).

In 1992, Midland Bank plc was officially became part of the HSBC Group. Midland Bank plc was one of the biggest banking consolidated by the time. After this, in 1999, Midland Bank plc was renamed HSBC Bank in September. Until today HSBC is a well known Bank in whole world. It is also consistently ranked amongst the top global brands across the world (HSBC 2013 (B)).

In 2000, HSBC launched Internet banking as well. They allowed customer to check balance, transfer, make payment and view transactions online. HSBC developed a new headquarter in London in 2002, which consist of 42 floors. The new headquarter in London was build follow by the Chinese traditional style, such as the two lions statues in front of the entrance. In 2003, HSBC became the first UK High Street lender who offering home buying that implement with Sharia law (HSBC 2013 (B)).

By the late 1970s, HSBC management team had come out with the strategy of “three-legged stool”. These three leg tools represented the three main markets, which are Asia- Pacific, USA, and UK. In 1980s HSBC bought Marine Midland Bank in USA that can be considered as the acquisition of the second tools. The primary target is to acquire the Royal Bank of Scotland, but its failed. Therefore, The HSBC changed the target to Midland Bank in 1987. (HSBC 2014 (B))

In 21st century, HSBC has re-focus on its origin. HSBC grow its business in China with the partnership. HSBC stand still in recent global turbulence in economies and market (HSBC. 2014 (B)).

2. Banking Activities of HSBC

First of all, HSBC UK possessed two major banking sectors, which are personal banking and business banking. In this section, I would like to focus on the personal banking. Under personal banking consist of Everyday Banking, Borrowing, Investing, Insurance, and also Planning (HSBC 2014 (C)). Whereas business banking content Business Banking turnover up to £2m, Commercial Banking, Cooperate Banking, International Business and other services (HSBC 2014 (D)).

2.1 Loan

The main activity of a bank is to borrow and lend money from the consumers. The bank makes money by letting customer to store money inside the bank and bank provide them an interest and of course bank will do some money reservation just to incase the customer wanted to withdraw their money suddenly. The banks can borrow the money from the depositor to borrower who wants loan money (Federalreserveeducation 2014). HSBC provide quite numbers of loans to their clients. HSBC gives Personal Loan, HSBC Premier Personal Loan, Graduate Loan, and also Flexiloan (HSBC 2013 (E)). Different types of loan comply different of loan terms and qualification. Everyone who apply loan from HSBC UK must be a resident of UK.

2.2 Saving Account

Under Personal Banking, let look deeper about what is everyday banking, there are current account, saving, ISAs, credit card, international services, and etc (HSBC 2014 (C)). Under saving account, HSBC provides few numbers of saving account such as HSBC Loyalty Cash ISA, Regular Saver, Online bonus Saver, Flexible Saver, Fixed Rate Saver, HSBC Premier Savings, Future Saver for Children, MySavings, and lastly, International Personal Saving Account. There are different terms and conditions under different saving account and also different interest rate for different saving account (HSBC 2013 (C)).

2.3 ISA

Besides saving account, HSBC provide ISA account. ISA stands for Individual Saving Account. Why ISA? Because, customer pay less tax or even no tax and this may increase your income (Johanna 2014). HSBC bank provide HSBC Loyalty Cash ISA, the HSBC Premier interest rate is 1.60% AER[1]. HSBC Advance interest rate is 1.50% AER. Other current account rate is 1.40% AER (HSBC 2013 (D)).

2.4 Credit Card

Besides saving account and loans, HSBC provide credit card as well. To be eligibility of HSBC credit card customer, the persons who wanted to apply for the credit card must be over 18 year old. And also must be the resident of UK. HSBC bank provide Customer to apply credit card such as HSBC Credit Card, HSBC Premier Credit Card, and Student Credit Card. Under HSBC Credit Card, the APR[2] is 18.9% p.a. The APR of HSBC Premier Credit Card is 11.9% p.a. For the Student Credit Card, the APR is 18.9% p.a. HSBC Credit Card can transfer balance to other account whereas HSBC Premier Credit Card and Student Credit Card cannot transfer balance to other account (HSBC 2013 (F)).

2.5 Insurance

Moreover, nowadays bank not only provide as simple as borrow and lend money. Banks provide some extra services such as insurance. According to oxford electrical dictionaries, insurance can be defined as a guarantee of some losses, illness, death or damages in return of compensate the investor (Oxford Dictionaries 2014). Basically, customers buy insurance under risky situation and prevent losses. HSBC bank did provide insurances for properties and family. Such as car insurance, travel insurance, home insurance and student insurance (HSBC 2013 (G)).

2.6 Student Insurance

As a student, I would more concern on the student insurance, students can choose the cover limits between £2000 and £5000 to protect themselves from the financial losses or damages as long as they are a student. Other than that, HSBC insurance provides accidental damage protection to the student. This covers the home entertainment equipment, glasses or mirrors up to £250 per incident. This is something special for a bank. They also cover personal desktop damaged, game consoles, remote controls, dishes and CCTV cameras, which are fixed in the building. Students can also choose other optional extras such as to claim the losses of personal belonging you have carry outside of your accommodation but within British. Or you can choose to cover the personal computer equipment that you carry out from your accommodation. Or another choice of covers the losses or damages to your cycle, which is locked to a building you accessed within the British Isles (HSBC 2013 (H)).

3. Regulation

Every bank in UK faced banking regulation. Included HSBC bank. Banking regulation can refers as financial regulation. According to Financial Time, financial regulation can be defined as laws, rules or regulation that usually published by government to control what financial institute can do. These laws are to protect the investors and maintain the financial stability. This regulation can be range by setting the minimum capital and conduct (Financial Times 2014a).

There are two main regulatory authorities in the UK. Which are “ The Financial Conduct Authority” (FCA) and “The Prudential Regulation Authority” (PRA). Both of these parties are split from Financial Services Authority (FSA) (FSA 2012). The Prudential Regulation Authority is to supervise the building society, bank, insurer, the major investment companies and credit union. PRA was form by the Financial Service Act. PRA is part of the Bank of England as well. FCA is another institution that not part of the Bank of England (Bank of England 2014).

After last financial crisis, the UK government comes out with some regulation in order to reduce some risk and make financial system to be more stable. And also make the global market to be more safety. HSBC bank has implemented some regulations in for key areas to protect the investor such as Market structure, Bank structure, Tax transparency and Capital and Liquidity (HSBC 2014e).

3.1 Market Structure

Under market structure, there are new rules developed by HSBC bank to increase the transparency and cut down the risk. For example, HSBC US is using the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA) to govern the market. Whereas, HSBC based in European Union (EU) is using the European Market and Infrastructure Regulation (EMIR) to stable the financial stability and reduce the risk (HSBC 2014e).

3.2 Bank Structure

The purpose of this structure implemented is to protect the taxpayers and consumers. HSBC bank proposes the Vickers “ring fencing” to the retail banking in the UK (HSBC 2014e). In European Union, Liikanen commission is recently complied for EU bank (Financial Times 2014b)

3.3 Tax Transparency

The government is trying to do their best to transparent the tax issues. In the US, the Foreign Account Tax Compliance Act (FATCA) is passed to avoid the money of company to be used on personal purposes. In other country there are also some similar regulations for the government to keep their eye on the tax payer (HSBC 2014e).

3.4 Capital and Liquidity

This area consist of Basel III, Basel III is a regulation that sets the capital ratio of a bank of 4.5% (Financial Times 2014c). The purpose of reserve the capital ratio is to prevent the next financial crisis. The reserve capital can be the money back up when it is economic crisis. There were a numbers of countries using Basel III. In the EU, the regulatory is carried out through Capital Requirement Directive (CRD) from January 2014 (HSBC 2014e).

Calculation

Referencing

HSBC. 2014 ( A ). Company History. [ONLINE] Available at: http://www.hsbc.com/about-hsbc/history. [Accessed 01 April 14].

HSBC. 2013 ( A ). Our history. [ONLINE] Available at: http://www.hsbc.co.uk/1/2/about-us/history. [Accessed 01 April 14].

HSBC. 2014 ( B ). HSBC'S History. [ONLINE] Available at: http://www.hsbc.com/about-hsbc/history/hsbc-s-history. [Accessed 01 April 14].

HSBC. 2013 ( B ). UK timeline. [ONLINE] Available at: http://www.hsbc.co.uk/1/2/about-us/history/uk-history?HBEU_dyn_lnk=OurHistory_UKTimeline_FindABranch_Link. [Accessed 01 April 14].

HSBC. 2014 ( C ). HSBC personal. [ONLINE] Available at: http://www.hsbc.co.uk/1/2/personal. [Accessed 02 April 14].

HSBC. 2014 ( D ). HSBC business banking. [ONLINE] Available at: http://www.business.hsbc.co.uk/1/2/. [Accessed 02 April 14].

HSBC. 2013 ( C ). HSBC Saving products. [ONLINE] Available at: http://www.hsbc.co.uk/1/2/savings-accounts. [Accessed 02 April 14].

Johanna. 2014. Full ISA Guide. [ONLINE] Available at: http://www.moneysavingexpert.com/savings/ISA-guide-savings-without-tax. [Accessed 02 April 14].

HSBC. 2013 ( D ). HSBC loyalty cash ISA. [ONLINE] Available at: http://www.hsbc.co.uk/1/2/savings-accounts/cash-isa/interest-rates. [Accessed 02 April 14].

Federalreserveeducation. 2014. Banking Supervision and Regulation. [ONLINE] Available at: http://www.federalreserveeducation.org/about-the-fed/structure-and-functions/banking-supervision/. [Accessed 02 April 14].

HSBC. 2013 ( E ). Bank Loan. [ONLINE] Available at: http://www.hsbc.co.uk/1/2/loans. [Accessed 02 April 14].

HSBC. 2013 ( F ). Credit Card. [ONLINE] Available at: https://www.hsbc.co.uk/1/2/credit-cards. [Accessed 02 April 14].

Oxford Dictionaries. 2014. Definition of insurance. [ONLINE] Available at: http://www.oxforddictionaries.com/definition/english/insurance. [Accessed 03 April 14].

HSBC. 2013 ( G ). Insurance. [ONLINE] Available at: http://www.hsbc.co.uk/1/2/insurance. [Accessed 03 April 14].

HSBC. 2013 ( H ). Student Insurance. [ONLINE] Available at: http://www.hsbc.co.uk/1/2/insurance/student-insurance/cover-details. [Accessed 03 April 14].

Financial Times. 2014a. Definition of financial regulation. [ONLINE] Available at: http://lexicon.ft.com/term?term=financial-regulation. [Accessed 06 April 14].

FSA. 2012. The split of FSA. [ONLINE] Available at: http://www.fsa.gov.uk. [Accessed 06 April 14].

Bank of England. 2014. Prudential Regulation Authority. [ONLINE] Available at: http://www.bankofengland.co.uk/pra/Pages/default.aspx#. [Accessed 06 April 14].

HSBC . 2014e. Financial regulation. [ONLINE] Available at: http://www.hsbcnet.com/financial-regulation. [Accessed 07 April 14].

Financial Times. 2014b. The Liikanen report decoded. [ONLINE] Available at: http://www.ft.com/cms/s/0/0ff0b3a4-0c8a-11e2-a73c-00144feabdc0.html#axzz2yCtqsQC0. [Accessed 07 April 14].

Financial Times. 2014c. Definition of Basel III. [ONLINE] Available at: http://lexicon.ft.com/term?term=basel-iii. [Accessed 07 April 14].


[1] AER= Annual Equivalent Rate

[2] APR= Annual Percentage Rate

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