The UK-based bank attempts to become less confused about itself with a new structure.
When it came to overlapping management and businesses, few global or international banks could match HSBC.
At one point, it had such a confusing matrix of reporting lines, segments, and countries that anyone trying to report or do anything in a risk and control function had to trawl through a confused palette of practically identical templates.
Unexplainable Idiosyncrasies
It was a tiresome, error-prone cut-and-paste exercise repeated dozens of times reflecting unwarranted senior management sensitivities and unexplainable technical, IT-related idiosyncrasies.
They had countries, regions, four business lines and what were de facto two headquarters, one in its historic base, Hong Kong, and another in London. Most of the time you didn’t know who was responsible for what and so you trawled the entire bank trying to get everyone happy with a bit of increasingly innocent something.
Gladly Tolerated
This also bred a culture of indecision where those who did the least, but somehow stayed around and managed to remain visible at important things like committee meetings, were gladly tolerated while many of the hapless rest were flushed out in unending rounds of job cuts passed off as redundancies.
The new restructuring announced on Tuesday is an undeniable attempt to make things simpler and change the bank’s culture.
Bitter Complaints
But it also seems to tackle another long-term issue at the bank. For years, the Asia Pacific side of the business, and Hong Kong in particular, complained bitterly about how profitable they were in comparison to the rest of the world.
The new four-pronged structure with Hong Kong, the UK, Corporate and Institutional Banking, and International Wealth and Premier Banking looks to be the way they solve that conundrum.
Old is New
And that fully seems to be their intent given the bank indicated in the announcement that the city remains «one of our clear strengths as a business».
Ironically, it also seems to look much like the old HSBC must have appeared, with a personal and a commercial banking business, and Hang Seng.
Account Scrutiny
The UK will remain ring-fenced, as it has been for years. Although it is required to do so, in practice it means it might as well be an entirely different institution altogether. As an example, in recent years, Hong Kong-based clients with business or private interests in the UK and the HSBC accounts to go with it have been known to be scrutinized for the audacity of actually needing a Hong Kong account at the very same HSBC on the other side of the world. Go figure.
Investment Banking
Things get a bit more interesting with the investment banking side of things, as it is now fully integrating its commercial banking business outside the UK and Hong Kong with the global banking and markets business.
It had been talked about for years but never seemed to fully come together. Now that it is, they have decided to also tack on a new geographic region along with it, as with the disposal of franchises in places like Canada and South Africa, as it seems to have become a largely wholesale banking market.
Remembering Private Banking
The wealth business and upscale retail or premier banking look largely unchanged on the surface, although the asset management business is now being lumped into it, along with the Global Private Bank, which was in there already.
That part of the equation also indirectly answers a question building related to Hong Kong and whether the individual business had been downgraded to a purely personal, or retail, business or not.
New Borders Drawn
The answer seems to be no. The new international wealth and premier banking business will only have franchises outside of Hong Kong and the UK.
Still, that brings us to the geographic changes. From next January, there will be a new Eastern Markets that includes the former Asia Pacific region and the Middle East while a Western Markets piece is to hold the not ring-fenced parts of the bank in the UK, the Continental European business, and the Americas. Confused yet?
The Big Tech Question
In short, whatever way you look at it, there is no easy way to truly simplify the structure of something like HSBC. You do something one way and it leads to unintentional consequences later. And at best, you are left with a matrix redux on your hands.
But there is a key fix that had previously diluted all previous attempts to restructure the bank and it relates to IT.
Not Compatible
Each business line had its IT systems, and they weren’t compatible. In the HSBC world, it ended up being fully justifiable the longer you heard someone drone on about it – a retail business, for example, couldn’t possibly use the same tech that a trading floor needed, as an example.
Still, the new management will have to look long and hard and figure out how to make everything work together if they want this all to be successful.
New Thinking
The devil is in the details, and that will require an entirely new kind of thinking at the bank.
One that doesn’t allow different listings of payees, for example, to be listed on the smartphone app in Premier banking as opposed to different one when a client logs on with a PC or tablet directly through a browser. I mean, is merging the two really such a big thing?
No Blowback
If they want to deliver service excellence to clients, they might want to start with that. If there is any blowback, then they also know who needs to be taken just a bit less seriously in the future.
