Greater China specialist, Stephen Green spoke yesterday at the Treasury Conference on Europe-China relationship.
LE FIGARO – With a CEO who has just moved to Hong Kong and a proposed listing in Shanghai, is this the year of homecoming for HSBC?
Stephen Green – It has been four years since we started this movement to Asia, but it is true that the transfer of Michael Geoghegan office in Hong Kong earlier this year, marks a significant milestone.
When do you hope to enter the Shanghai Stock Exchange?
We expect the Shanghai Stock Exchange opens to foreigners. This process takes time. Let the Chinese authorities to develop policies and adapt the rules.It is unlikely that we can go public before the end of the year.
HSBC would be the first foreigner to be quoting in Shanghai?
We'd love to, but we're not the only candidates. There is also the ranks of major manufacturers with significant operations in China.
Why this rating?
This shows our long term commitment to China. The capital raised also fund our development in the country. This occurs on one side through our partnership with Bank of Communications, China's fifth largest bank, which we own 19%. We have a very important joint venture in the field of credit cards. Our development is also through our own network we want to expand. We have recently opened our hundredth agency and we would like to be present in all Chinese provinces.We need capital to finance not only our physical development but also to lend to small businesses in China.
The Chinese regulator urges domestic banks to better manage their risks. Is this a danger?
The overall outlook of the Chinese economy are excellent. The growth promises to remain strong for many years, with the aim to extend development to the west. In this context, banks have an important role in financing. As everywhere, there will be bubbles. But for ten years, banks have greatly strengthened, both in equity but also in ability to control risks. I am not worried about how the Chinese banking system operates.
What is the step after?
The main challenge for China is in the creation of a large debt market.For now, Chinese companies are financed through banks or equity markets. They will need an efficient debt market.
Do you fear the new prudential standards Basel 3?
The G20 meeting in Toronto next week, will be important. I observe a growing awareness on the part of governments that reform can not be applied in the calendar originally proposed. It takes time. It is essential that regulators calibrate the measures taking into account their impact on the real economy. If the device was applied as such, the banking system should recapitalize by much too important.
The tax on banks you worried she also?
This topic is joined in the previous because they threaten the profitability of banks. Some have generated returns of nearly 30% that were not sustainable.But, conversely, governments and regulators should realize that if banks are no longer sufficiently profitable, it attracts more private capital. And therefore, they can no longer finance the economy.
What is the minimum rate of return?
It is estimated that the cost of capital for a bank is around 10 to 11%. Therefore a return above this level.
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