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Joint Standing Committee on Foreign Affairs, Defence and Trade
06/07/2017
Australia’s trade and investment relationship with the United Kingdom

TRICAUD, Mr Martin, Chief Executive Officer, HSBC Bank Australia

MATTHEWS, Mr David, Head of Communications, HSBC Bank Australia

[14:05]

CHAIR: I now welcome representatives from HSBC Bank Australia. Thank you very much for your submission and also for the bank giving us a briefing in Canberra a couple of months ago. I now invite you to make a brief opening statement and then we will proceed to discussion.

Mr Tricaud : Thank you for this opportunity to appear before the subcommittee. I would like to make three relatively short points. One is about HSBC and the importance of the Australian market for HSBC. As you may know, HSBC was founded about 150 years ago in Hong Kong, but then in the same year in the UK. The UK is, obviously, a very important country to us. This is the location of our headquarters. We employ 45,000 people in the UK and we serve 17 million customers in the UK.

We have been in Australia for a little bit more than 50 years now. This is a strategic and priority country for HSBC. We employ about 2,000 colleagues in Australia. We operate across four businesses: retail banking, commercial banking, global banking and markets, and global private banking. We wish to invest and to develop very strongly in those four areas. In December last year we agreedand that was something endorsed by our group management boardon a country strategic plan, which is an investment plan, a development plan, for HSBC in Australia with the ambition to grow significantly our presence in the market. That will translate in the next couple of years with the recruitment of an additional 300 people and the opening of an additional 15 branches. It is a very strong commitment to both countries, the UK and Australia.

My second point is about the HSBC commitment to support trade liberalisation. HSBC started as a trade bank. Trade is really in the bank's DNA. We started by financing trade flows between Europe and Asia. We believe that trade boosts development, reduces poverty, enhances competitiveness and facilitates and encourages innovation. We are very strong supporters of everything which can facilitate the development of trade flows.

From that perspective, we think that Australia has done well over the last decade with an arsenal of, I think, 10 free trade agreements which were executed over the last years and which have supported very strong liaisons and 26 years of continuous growth of Australia. In that context we think that an FTA between Australia and the UK would be very favourable and we would look at it in a very positive way. We see some scope for developing trade flows in particular in the agricultural sector but also in services, tourism, education and financial services in particular.

Lastly, we believe that free trade agreements are a starting point, but just a starting point. In addition, there is a need for education of the market's stakeholders. In 2014 we did a survey with Australian exporters. We realised at the time that a little bit less than 20 per cent of Australian exporters were fully using and taking all the possible benefits of the existing FTAs. There is a need for education. There is a need for promoting awareness and better knowledge of how to use those FTAs. We are very committed at HSBC to supporting that in partnership, obviously, with government bodies like Austrade.

CHAIR: Thank you very much. We will now proceed to questions. Mr Perrett.

Mr PERRETT: Thank you, Chair, and thank you for your presentation. About 20 years ago I think HSBC had an experience where Hong Kong changed significantly in terms of relations with Beijing, obviously. You have experience with a major financial hub changing, or the circumstances around it changing. Can you comment on the risks and opportunities, perhaps, that come with Brexit, particularly with London being such a strong financial centre and a bit of a gateway to Europe and to Asia and Australia, and elsewhere?

Mr Tricaud : As I mentioned, London and the UK is a very important centre for HSBC because this is where we have our head office. We think it is too early to be in a position to make any prediction on what will happen in a post-Brexit environment. We do not know. We have to acknowledge that nobody knows today what will be the different options and shades of variations of Brexit. We will have to wait and see what will be the potential agreement between the UK and the EU and what will be the implications on the financial industry and on HSBC in particular. Because we have a very significant presence in Continental Europe and France in particular

Mr PERRETT: That does not sound like a London accent, Mr Tricaud.

Mr Tricaud : That is absolutely right.

Mr PERRETT: Are you renting offices in Paris?

Mr Tricaud : We have offices in Paris. That is where I started my career. We employ about 10,000 people in France.

Mr PERRETT: So 45,000 in the UK.

Mr Tricaud : Yes.

Mr PERRETT: And 10,000 in France?

Mr Tricaud : Yes, and a few thousand in the rest of Continental Europe. In France we acquired the bank in 2000. It was called Credit Commercial de France. This is a strong platform we have on the continent and within the eurozone. From an HSBC perspective, we already have all the licences we would need to operate in the EU area.

Mr PERRETT: Obviously not every one of your competitors is as strongly situated?

Mr Tricaud : That is correct.

Mr PERRETT: Can you make comment, particularly with your expertise, in terms of the City of London, Asia, Australia and other places where HSBC does business?

Mr Tricaud : Yes.

Mr PERRETT: Not so much the EU, but other parts of the world?

Mr Tricaud : Maybe I can comment on something which has been very important to HSBC, which is the relationship with China and the contribution to RMB internationalisation and to the more recent belt and road initiative. This is something where the City of London has taken very strong leadership in Europe. This is not the only financial centre to have invested strongly in this area; Frankfurt, Paris et cetera have also tried to position themselves. But in terms of RMB internationalisation, the City of London has done a remarkable job in promoting itself as a regional financial hub.

Mr PERRETT: It is not a gateway; it is a hub. Is that the term you are using?

Mr Tricaud : I have used the term 'hub' but 'gateway' would certainly be a term which could be used in the pre-Brexit context. I am not in a position to say whether it would still be valid terminology in the post-Brexit environment. Clearly, this has been very important. HSBC has been trying to support this initiative.

You mentioned Hong Kong. For Hong Kong, this is exactly the same. With Singapore, this is the largest financial centre for renminbi internationalisation. HSBC, in the same manner, has been trying to support those initiatives because we are strong believers in the potential of those initiatives.

That said, we also believe that there is space for several financial centres, and that Australia has a role to play in that space, knowing that Australia has been able to finalise and sign a free trade agreement with China which is quite successful and has supported trade between both countries in a very successful manner. We would certainly be prepared to encourage any initiative which would come from Australia as well.

Mr PERRETT: Is Sydney well placed for that?

Mr Tricaud : I think so. The level of expertise in the financial sector in Sydney would certainly facilitate the development of a regional financial centre of expertise. Also, the importance of the underlying trade and investment flows between Australia and China makes a very strong argument for Australia taking a more important and maybe more prominent role in terms of financial transactions in RMB or in terms of belt and road related initiatives.

Dr McVEIGH: Thank you for your presentation and your submission. In your submission you make, in my mind, a couple of points. You talk about the fact that HSBC's role, amongst other things, is to support your various clients through the complexity of all of this. You talk then about your own forecaststhat, as a result of the referendum and Brexit, there is 'dented confidence', to use your term, both within the UK, I take it, and with those who deal with the UK in commercial activities. Despite that, you remain, obviously, quite optimistic about the future of the UK economy, and in our case of Australia dealing with the UK. Am I reading that right? If so, can you take us through any feeling that you have about the timing of moving through those phases? The reason I ask that is that in this inquiry we are receiving plenty of evidence from those who suggest that Australia should proceed as quickly as it can with some sort of free trade agreement with the UK, and others who are saying it is too complex, it is too difficult and we should wait and see.

Mr Tricaud : I think it is a very fair question, and I know that there are a variety of opinions on the matter. We need to be very humble in our capacity to make any forecast. I do not think anyone is in a position today to say what will be the ultimate form of the Brexit. Again there are a number of options, and, depending on what is the final outcome, that will have very different implications for the various stakeholders.

On your question about the timing of a potential negotiation, we do not feel in a position to give advice to the negotiators and the diplomats. There are also some regulatory constraints which may make an acceleration of the timing agenda difficult. Certainly, we believe that reaching an agreement with the UK in due course will be very beneficial. It could allow the trade relationship to grow significantly, and potentially the investment relationship as well. It is not for us to say what the priorities should be, but definitely we would put no exclusivity on any agreement. That is what we can say at this stage.

CHAIR: Thank you for your evidence. If financial services are a key component of any future FTA, what would you like to see in such a chapter, specifically?

Mr Tricaud : Like all investors, we care certainly about stability and predictability. Having the ecosystem, from a legislative, regulatory and tax perspective, being predictable is very important to us. Financial services may be impacted by an FTA, but they will not be impacted by an FTA only. There are many other considerations. Australia is a member of the G20. Australia is a member, like the UK, of a few governing bodies, regulatory bodies, for the financial industry globally. One of them is the Basel committee. Another one is the Financial Stability Board, which was created in the context of the G20. There are some regulations which are available at that level, and sometimes there are also some regulations which are available at the EU level and recognised by the Australian regulator. It will be important; I am probably not knowledgeable enough on the subject to be entirely conclusive, but I believe that the part of EU regulation which is recognised by the Australian regulator, in one way or another, in a post-Brexit environment, will have to be adjusted. For banks like HSBC, with headquarters in the UK, this regulation will have to be recognised in a different manner.

CHAIR: When you talk about stability and predictability, investor-state dispute settlement mechanisms would be something that you would be keen to see included?

Mr Tricaud : Yes, absolutely. What we believe are key components of an FTA, generally speaking, are monetary value, obviously; and trade facilitation at the borders. If the FTA could cover not only financial services but tourism, education et cetera that would certainly be very important.

CHAIR: Do you see any need for better coordination between the federal government and state governments when it comes to facilitating trade relationships?

Mr Tricaud : I am probably too recently arrived in the country. I have been based here for three months.

CHAIR: Do you mind taking that back to your team and letting us know, on notice?

Mr Tricaud : Absolutely. My general comment would be that collaboration is obviously critical, and that we at HSBC would feel prepared to collaborate at both levels, if the opportunity was given to us. But we will come back to you on that, Madam Chair.

CHAIR: Thank you very much. There being no further questions, we thank you for your attendance today and wish you all the best. If we have any further questions, we will get back to you.

Mr Tricaud : Thank you very much.