HSBC 2007 Annual Report Download - page 41

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The Competition Commission (‘CC’)
commenced an investigation into the payment
protection insurance (‘PPI’) market in February 2007
and published its Emerging Thinking document in
November 2007. Provisional findings are due in
May 2008 and the final report towards the end of the
year. Similarly, the Financial Services Authority
(‘FSA’) conducted the third phase of its review of
the sales processes and systems around the sale of
PPI policies and is now undertaking further
assessment of firms’ performance in this area.
In December 2007, the CC announced its
decision to lift the price controls imposed in 2003 on
HSBC and the other three largest banks providing
services to small and medium-sized enterprises in
the UK. This is expected to result in greater
competition and innovation within the market.
During 2007, the OFT continued to investigate
competition issues in connection with the setting of
multilateral interchange fees for domestic credit card
payments.
France
In 2007, interest rates in the eurozone increased
while growth in real estate investment stabilised.
Income tax relief on new personal real estate loans
was introduced following the presidential elections,
though potential benefits to customers were offset by
higher interest rates. Real estate mortgage loans
remained the primary product by which banks
attracted new customers and, as a result, competitive
pricing led to decreased margins.
The French government introduced various
fiscal incentives in the second half of 2007 which
reduced tax on overtime pay and introduced a cap on
the total tax paid by households at 50 per cent of
income. These measures increased the disposable
income of wealthier individuals who qualify for
HSBC Premier and Private Banking services.
The commercial treasury bills market contracted
and companies had difficulty obtaining facilities in
the second half of 2007 due to market uncertainty.
This trend is expected to continue in 2008.
Hong Kong
The lending market remained active in 2007,
initially driven by investment-related loans and,
subsequently, as interest rates declined and market
uncertainty increased, by property loans. A robust
labour market and rising household wealth supported
growth in consumer spending. As a result, demand
for personal loans and credit cards rose.
In the middle of 2007, downward pressure on
interest rates and an overall improvement in the
property market led to increased demand for
mortgages. Prices for high-end properties rose,
though competition in traditional mortgage products
remained fierce.
Rising equity markets stimulated sales of
investment products and related loans. After a lull in
demand in August and September, when disruption
to money markets intensified as the implications for
asset-backed securities of the growing credit crisis
were reassessed, the market experienced intense
volatility, accentuated by the possibility of a
recession in the US.
Funds were attracted to Hong Kong during the
year in anticipation of sustained appreciation of the
renminbi as well as a positive outlook for the
mainland Chinese stocks listed in Hong Kong.
Deposit growth remained robust throughout the year
and the status of Hong Kong as the chief financial
centre to service the needs of businesses in Southern
China was enhanced.
Rest of Asia-Pacific
(including the Middle East)
The business environment in the region remained
highly competitive, notwithstanding increased
demand for credit in Asian countries partially
resulting from lower interest rates. In particular,
short-term interest rates in mainland China, India,
Indonesia, Malaysia and Singapore were less than
the nominal Gross Domestic Product (‘GDP’)
growth rate.
Mainland China
The People’s Bank of China indicated that it would
continue to apply tight monetary policy to address
excess domestic liquidity, to curb lending and to
strengthen macro-economic conditions. Loan growth
in mainland China remained robust despite this
tightening and the benchmark one-year lending rate
increased to 7.47 per cent by the end of 2007. The
renminbi reserve requirement ratio for depository
financial institutions increased to 14.5 per cent.
India
Loan growth in 2007 slowed due to earlier monetary
tightening and adverse regulatory policies which
restricted the activities of recovery agents.
Aggressive growth strategies by several banks
compressed margins and reduced overall asset
quality.