HSBC 2001 Annual Report Download - page 27

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In September 2001, the Office of Fair Trading
(‘OFT’ ) announced that it proposes to make a
decision that the level of interchange fees among
MasterCard/Europay members (which includes
HSBC Bank plc) infringes UK competition law.
Both MasterCard/Europay and HSBC have made
written representations to the OFT and a final
decision is awaited.
France
After a good year in 2000, retail and commercial
banking showed a considerable resilience to the more
difficult conditions in 2001. Moreover, the lending
market remains highly competitive and margins
continue to be squeezed although there are signs that
the market is stabilising.
Hong Kong
Competition from locally incorporated and foreign
banks remains fierce, particularly for quality
customers and quality assets. Competition for credit
cards and consumer assets has remained strong as
banks have looked to consumer lending to replace
mortgage loan growth and to achieve a higher return
on assets. This trend is likely to continue through
2002. Pressure for consolidation of banks is likely to
continue into the year and may result in fewer, but
larger, competitors vying for market share.
Deregulation of brokerage commissions will increase
pressure on securities trading revenues. As market
leaders, The Hongkong and Shanghai Banking
Corporation Limited and Hang Seng Bank are well
placed to meet these challenges.
Rest of Asia-Pacific (including Middle East)
The competitive environment varies greatly across
the region, depending on the level of regulation,
number of entrants and the maturity of the markets.
Competition remains intense throughout the Middle
East with a large number of banks serving relatively
small populations in each country. The global
economic slowdown, together with the events of 11
September 2001 have affected many economies
around the region as oil income and tourist revenues
have declined. Against this background financial
markets in many countries are undergoing rapid
change and management believes HSBC is well
placed to benefit from the diverse opportunities that
these changes will bring.
In most markets in the region, local banks
dominate while foreign-owned banks have a
relatively small market share typically focused on
trade finance and servicing branches of multinational
companies. Nevertheless, foreign banks can attract a
disproportionate share of high net-worth and
professional customers due to their extensive range
of services, international connections, advanced
technology and financial strength. In most countries
in the region, the relatively young population and
maturing sophistication in financial services are
expected to provide growth opportunities for HSBC.
While several foreign competitors have reduced
their involvement in the region due to the economic
slowdown, HSBC continues to command respect by
maintaining its commitment to the region and
supporting its long-term relationships.
North America
In the United States, mergers and acquisitions in the
banking, insurance and securities industries have
brought consolidation, conglomeration and a
blending of services. HSBC Bank USA also faces
vigorous competition from a large number of non-
bank suppliers of financial services that have found
new and effective ways to meet the financial
demands of customers. Many of these institutions are
not subject to the same laws and regulations imposed
on HSBC Bank USA.
The Gramm-Leach-Bliley Act of 1999 (‘GLBA’ )
took effect on 11 March 2000. GLBA enables banks,
securities firms and insurance companies to enter
into combinations that permit a single financial
services organisation to offer a more complete line of
financial products and services.
GLBA established functional regulation which
could impact the way certain securities and
securities-related activities of banks are conducted.
Under the so-called ‘push-out’ provisions of GLBA,
securities brokerage and certain investment advisory
activities have to be conducted through SEC-
registered affiliates of banks, unless the activities
come within certain exceptions to such provisions.
The SEC has deferred the effective date of an interim
final rule providing guidance on ‘push out’ until 12
May 2002.
On 26 October 2001 President Bush signed into
law a new statute, the USA Patriot Act, that imposes
substantial new money-laundering detection and
monitoring requirements on US banks and US broker
dealers. Certain of the requirements became
effective on 25 December 2001; other requirements