The Benefits Of Globalisation

When the Bank of Bermuda was sold to HSBC last year, I was one of those in favour of the deal. Having recently arrived from the UK, where I banked with HSBC, I could see many ways for the Bank of Bermuda to improve their service.

So I was glad to read in today's Royal Gazette that some of those improvements are starting to materialise. Access to a larger number of ATMs around the world will be a big asset to those who travel. Customers with large amounts of money with the bank are also likely to benefit from the HSBC Premier scheme, although if my brief experience of it in the UK is anything to go by, don't expect it to be quite as personal as the bank are suggesting. Automatic authorisation of credit card limit increases is also welcome, although more of a double-edged sword. Even those who don't have their money with the Bank of Bermuda may benefit if the competition spurs the other banks to offer similar services.

There was much opposition to the HSBC deal because it resulted in Bermudian assets being transferred to foreigners. But to me, the quality of service provided by the Island's businesses is more important than whether they are Bermudian-owned.

Comments

[Tiger Bay on 13.04.05 at 20:00]

The sale of Bank of Bermuda was good for Bermuda's international business sector (providing a big name in our jurisdiction). It may also shake up the local retail banking sector, although the jury is decidely out on that.

However, I am not convinced it was good for Bermuda. Before, the Bank's global profits largely came back to Bermuda and its local shareholders. Now profts all go out to the UK.

We all know that the Bank's headcount has shrunk dramatically - what is less obvious is the number of Bermudian middle managers who have been replaced by expats. The Bank is bringing in literally hundreds of new work permit holders.

HSBC bought a book of business from the bank; the valuable funds part of that business is rapidly gravitating elsewhere. We will be left with a nice HSBC community bank.

[shipstones on 13.04.05 at 20:51]

You'll soon be able to buy the AIG building back!

[Guilden M. Gilbert, Jr. on 13.04.05 at 21:37]

Tiger,

But what about the rights of Bermudians to live and work in Europe. Surely those that lost their jobs have much experience and should be able to re-apply to HSBC using their EU passports.

Further, Bermudians who currently work for HSBC should be able to request a tranfer to other branches of HSBC because of the EU passports.

But seriously, while the acquisition was good for the international business sector, I fully agree that the profits that once went to Bermudian shareholders now leave the country. Under HSBC the bank is now effectively an international company with operations in Bermuda.

[big bad wolf on 13.04.05 at 23:20]

Tiger Tiger burning bright in the forest, in the night....What bank do you have your paw on? ^..^

[ace on 14.04.05 at 07:53]

Stock tip of the day:

Buy Bank of Butterfield shares!!!

[The Limey on 14.04.05 at 13:11]

Tiger/Guilden

I fully agree that the profits that once went to Bermudian shareholders now leave the country

So what? There are plenty of other stocks or funds that the local shareholders can invest in instead. They could even continue to invest in HSBC shares. Your average investor just wants a good return on his investment - I don't see that it matters whether that return comes from a Bermudian-owned company or elsewhere.

Job losses could have caused some social problems, but I've heard nothing to indicate that this is the case. Besides, Bermudians have an interest in the bank being run as efficiently as possible: if the bank's costs are lower, won't that lead to investors and/or depositors getting better returns on their money?

The Bank is bringing in literally hundreds of new work permit holders.

First I've heard of this. If true, why are the bank doing this? Because the local talent isn't available (in which case, what's the problem?) or because HSBC doesn't like employing Bermudians?

[Tiger Bay on 14.04.05 at 14:09]

The Bank of Bermuda is a major engine of our economy. Its global profits largely came back to Bermuda and Bermudians before. Now, the reverse is true ... it takes a large amount of capital out of Bermuda to HSBC. For obvious reasons, this is not as good. The Bank may grown better and faster than it did as an independent ... but it will provide less for us.

HSBC owns the Bank. They are bringing in their managers. This may change as Bermudians are inculcated in the HSBC way.

Why can the Bank be sold to a foreign corporation, and not Triminghams?

[akinola on 14.04.05 at 17:29]

Free trade includes workers to increase the tax base, the problem is the Government does not use these taxes for poor people at the bottom and the island is so small if one lobbies he is blackballed. u foreigners need to fight for poor people's rights.

[The Limey on 14.04.05 at 17:47]

Tiger

Its global profits largely came back to Bermuda and Bermudians before. Now, the reverse is true ... it takes a large amount of capital out of Bermuda to HSBC. For obvious reasons, this is not as good.

Although I don't necessarily disagree, this all sounds awfully woolly. How does this affects the average man in the street? What are these "obvious reasons"? They're not obvious to me, but I'm probably just being a bit dense today.

[Tiger Bay on 14.04.05 at 18:08]

I'm talking about the impact on our community/country. In 2003, the Bank had profits of 28 million. A large amount of that went into into Bermudian pockets ... in addition to taxes and payroll. The first is gone, and the latter two are diminished.

[Tiger Bay on 14.04.05 at 18:15]

Sorry, in 2003 Bank profits were 93 million.

Hey, that's nearly the cost of the Berkely cost overruns...

[Northrock on 14.04.05 at 22:35]

Tiger
I work in the valuable funds division of the bank and judging by my ever increasing workload business is not being transferred elsewhere, in fact the opposite is happening. There has been a large influx of new staff, the majority of whom are on work permits. I'm a Bermudian and came back to the rock having been working in London. I got interviewed and offered a job by the bank within 24 hours, no second interview, aptitude tests or anything. In England I had to endure several day long assessments before landing something.

This all makes me believe any young Bermudian with a desire to launch a career has a clear advantage here. Plus I've never seen so many scholarships on offer anywhere else in the world!

[Tiger Bay on 15.04.05 at 07:14]

Bank PR department, huh.

[The Limey on 15.04.05 at 08:03]

Tiger

What was the mechanism for that "large amount" of 93 million ending up in Bermudian pockets? Increase in value of the stock? Dividends? Bermudians could get similar benefits from owning any other stock.

As for taxes and payroll, the Government will be getting payroll tax from those hundreds of foreigners you say they're now bringing in. And I'd like to bet that the majority of those who have lost their jobs at the bank have found alternative employment elsewhere.

Where's the problem here?

[Tiger Bay on 15.04.05 at 08:23]

I am not talking about investor returns, I'm talking about impact on our economy.

It's simple: a Bermudian owned company that earns tens of millions of dollars from transacting business in the community, on the whole, keeps those dollars in the community.

A foreign owned company doing the same sends those profits to its parent. The dollars leave the community.

[big bad wolf on 15.04.05 at 09:27]

Heah Tiger your right...and besides if globalization means that now that the Bank of Bermuda is owned by HSCB all staff have to wear red uniforms and all plants will be removed from HSCB banks.....LETS BUY BACK THE BANK OF BERMUDA!

[lickinalong on 15.04.05 at 10:11]

On a different but related issue it is interesting that the standard for corporate governance both here and elsewhere is that major decisions of a corporation require shareholder approval. In the case of the sale of the Bank of Bermuda to HSBC, it required at least 75% of the shareholders to directly approve the sale. Yet with the question of the independence of Bermuda, a major decision for our country, the PLP are continuing to suggest that this should be done indirectly through a general election. If such standards were in place in the corporate sector, the shareholders would have deferred this decision to the Directors and would not have been able to directly particpate in this decision. One cannot imagine the Government allowing this to happen.

It is bizarre that standards in the corporate sector are actually more democratic than the standards that the PLP want to impose in the political sector. Maybe it is time for the politicians to start to accept the standards that they impose on other sectors such as corporations and unions (ie. required member approval of all contracts). This is just another example of the PLP saying "do as I say not as I do". Other examples imposed by both the UBP and the PLP have resulted in the Government not being subject to the Human Rights Act and to the CURE regulations and the exemption of Cabinet and Cabinet Ministers from review by the Ombudsman. It is really hard not to be cynical.

[The Limey on 15.04.05 at 13:13]

Tiger,

You're still talking in very vague terms. Can you humour me with some more specific examples of how these dollars are no longer being kept in the community? And exactly what the impact of this is on Joe Bermudian?

Sorry for banging on about this but I hear a lot of talk about how foreign ownership of Bermudian companies is bad for Bermuda and I still don't really understand why.

[Weeee on 15.04.05 at 13:49]

The same reson some Bermudians hate ex-pats

[Tiger Bay on 15.04.05 at 14:09]

Say a company earns 10 million locally. If it has bermudian shareholders, that money stays here ... it is reinvested within the community.

If it is foreign owned, that 10 million leaves Bermuda. It is gone.

Again, I am not speaking about Joe Bermuda. I am talking about our overall economy.

[Anon (with reason) on 15.04.05 at 21:21]

Tiger Bay
I don't think I understand. Are these investors not allowed to buy HSBC stock?

I'm with Phil. Stock is Stock.

P.S. Phil - I keep meaning to say hello to you/introduce myself at the gas station (in the morning) but you always look so busy!

[big bad wolf on 15.04.05 at 21:24]

Anon say hello next time...Phil is a friendly guy and has already caught onto saying ,"Good Morning." ^..^