HSBC 2009 Annual Report Download - page 13

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necessary steps to improve the way our markets
work, there are also some important over-arching
challenges which we must address.
It is imperative to strike the right balance
between strengthening the financial system and
supporting economic growth. ‘De-risking’ the
banking system, if taken too far, will throttle
recovery and drive risk into other, unregulated parts
of the capital markets. It is in the collective public
interest to get this balance right. We must not rush to
implement hastily conceived responses and policy
must be co-ordinated internationally if we are to
manage risk better in a truly global industry.
Policymakers also need to evolve new
macroeconomic tools which will assist them to
manage the supply of credit, as well as the cost of
credit, in the economy. I believe a key element of
this involves managing bank capital on a
countercyclical basis which strikes the right balance
between financial system stability and the prospects
for economic growth. We cannot deliver a
sustainable financial system without improving the
wider framework for macroeconomic management
too.
Finally, in the context of a wide-ranging
discussion on the appropriate size and shape of
banks, we must recognise that corporate structure
and liquidity management are at least as important as
size per se. This debate has sometimes been given
the unhelpful shorthand ‘too big to fail’, but the
reality is more complex than the headlines suggest.
We believe that the financial system needs banks
which are ‘big enough to cope’ by having a
diversified business portfolio, helping to reduce risk
and to generate consistent returns. There has
likewise not been enough consideration given to the
need for banks to be ‘broad enough to serve’ those
global customers who have increasingly diverse
financial needs. In short, it is undesirable and
impractical to prescribe some ideal model for a bank.
The crisis clearly demonstrated that systemic
importance is not a function of size or business
focus.
HSBC has always believed in having a
transparent structure based on separately capitalised
subsidiaries, takes a conservative approach to
liquidity management, and has built a business with
the scale to provide broad, diversified services to its
global customers. While the detail and timing of
regulatory change remain uncertain, we are
confident that our focus on these fundamentals
positions us strongly and competitively to respond to
the challenges ahead.
S K Green, Group Chairman
1 March 2010