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* Bank considering move from London to HK
* China grip on Hong Kong a key factor for U.S. regulators
* HSBC would have to reapply for banking licences
* For graphic http://link.reuters.com/zav54w
By Michelle Price and Huw Jones
HONG KONG/LONDON, April 28 (Reuters) - The regulatory casefor HSBC to shift its head office from London to Hong Kong isnot clear-cut and the huge bureaucratic upheaval such a movewould involve may outweigh other advantages, lawyers andanalysts say.
Hong Kong's regulators could impose a string of conditionson the bank, while authorities in Britain and elsewhere mightalso insist on onerous requirements before signing off on achange of domicile. These could include extra guarantees on howHSBC could be rescued without burdening their taxpayers.
China's tightening political grip on Hong Kong is anotherfactor for regulators across the world, especially in the UnitedStates, could persuade the bank not to move its headquartersfollowing a review announced on Friday.
"HSBC operates one of the 10 largest U.S. banking holdingcompanies and so for them to relocate into a perceived Chineseregulatory jurisdiction could be challenging," said Jim Antos,bank analyst at Mizuho Securities Asia in Hong Kong.
"All the bank's main regulators -- UK, U.S., Hong Kong andmaybe Singapore -- would have to agree, and that process if ittook a year would be very fast."
Lawyers and former regulators who spoke on condition ofanonymity given HSBC's reach into the financial sector doubtedthe bank would actually make the move, the prospect of whichpushed its stock up 3 percent after the review was announced.
HSBC has been a vocal critic of the regulations and extrataxes imposed on British banks since the financial crisis, whileChairman Douglas Flint said on Friday the threat of a Britishexit from the European Union was another reason for the review.
While the regulatory regime in Hong Kong is generally lessprescriptive than in the west, a bank that wants to operateglobally cannot escape the more detailed rules in London or NewYork, said a London-based lawyer just back from a stint in Asia.
Given the speed and scope of reforms since the financialcrisis, few analysts believe a full picture of the newregulatory world has emerged, meaning further rule changes couldyet wipe out advantages offered by one location over another.
HSBC would have to apply for new banking licences in HongKong, and there could be tax implications elsewhere.
LIMITED BENEFITS?
"It's not apparent why it should be a significant benefitfrom a regulatory perspective," a former European regulatorsaid. "It's not easy to switch domicile and the question will bewhat are the real benefits that would achieve. I don't thinkyou'll see the UK roll over and say this is a great idea."
HSBC would have to exit the UK totally to avoid Britain'sbank levy and European Union regulation, a step few expect,although one expert suggested it could cut its bank levy bill byseparating off its retail and wholesale activities there.
Retail operations of banks in Britain will have to bering-fenced with extra capital in the UK from 2019.
Some analysts argue that HSBC could actually be hit byhigher capital requirements in Hong Kong given that the lender'sbalance sheet is eight times the size of the local economy.
"We would expect exceptionally conservative regulation fromthe Hong Kong Monetary Authority," said Morgan Stanley analysts.
But others challenge this assessment, saying the bank'ssubsidiary-style operations mean moving its domicile may notmake that much difference to the group structure.
Capital calculations could change in other ways, however,due to local differences in how regulators assessrisk-management models.
"There are a number of capital rules that aredomicile-specific, especially the use of capital models forthings like credit risk and market risk," said KeithPogson, managing partner for financial services, Asia Pacific,at consultancy EY in Hong Kong.
"These have to be approved by the home regulator, and theHong Kong Monetary Authority hasn't been as generous inapproving those internal models in the past as the UKregulator."
Lawyers and consultants say the key question facing HSBC andother banks is not where to locate the head office but how tomake money in a world of low interest rates and burdensomeregulation in general.
"The market has over-reacted to something that's not thatlikely," said Mizuho's Antos. (Additional reporting by Lawrence White in Hong Kong; Editingby Catherine Evans)
