HSBC stops accepting new New Zealand retail banking customers, tells existing customers to 'start engaging with other financial services providers'

HSBC says it'll wind-down its New Zealand wealth and personal banking business over several years, and is stopping accepting new NZ retail customers with immediate effect.

The bank says the decision follows a strategic review and reflects the rapidly evolving commercial, regulatory and technology environment for running a sustainable retail banking business.

HSBC says it'll continue operating and growing its NZ wholesale banking business, which includes commercial banking and financial institutions and government business, plus markets and securities services business.

"Over the course of the planned exit, HSBC will continue to support its wealth and personal banking customers to ensure a smooth transition to other service providers. However, the Bank will stop accepting any new retail customers in New Zealand, with immediate effect," HSBC says.

HSBC has been operating in NZ for more than 35 years. As of December 31, 2022, HSBC NZ had residential mortgages of $1.6 billion, with total gross lending at $4.7 billion. Customer deposits stood at $4.8 billion. The bank's 2022 profit after tax was $46.92 million.

Late last year HSBC said it was reviewing its NZ retail banking operations with a sale one of a number of options under consideration.

'Start engaging with other financial services providers'

In an email to customers on Tuesday afternoon Martine Milicich, HSBC NZ's Country Head of Wealth and Personal Banking, says it has become clear that HSBC can no longer justify investing into its NZ business given the changing operating requirements in the market and scalability of the business.

"We have therefore made the decision to wind-down our wealth and personal banking business, which will happen over several years in a phased manner. Please rest assured that we remain committed to supporting you throughout the entire wind-down process. We will continue to honour our obligations to all customers under any existing agreement, or to those who have received formal Letters of Offer, as well as pre-approval letters issued prior to the date of this letter," Milicich says.

HSBC is no longer accepting new applications for home loans including top-ups of existing loans, term deposit applications, account opening applications, and debit Mastercard applications.

"The most important thing you need to do is to start engaging with other financial services providers to understand your alternative options. More specifically:

"If you have a fixed-rate home loan, we will move the loan onto our variable rate upon fixed-rate maturity until you refinance elsewhere. However, we understand that switching providers can take time, so if your fixed rate matures before 13 September 2023, we will offer you a one-off option to refix for a further six-month term."

"If you have a term deposit; - on a term of three months or less and it is set to auto-roll, we will continue to auto-roll this until 13 September 2023. After this date, on maturity, we will credit the funds to your nominated account. - on a term longer than three months and it is set to auto-roll, we will change the maturity instructions and will credit the funds to your nominated account on maturity. - up until 13 September 2023, we will have terms of one to three months available should you wish to reinvest."

"If you have current, savings or foreign currency account(s), we encourage you find another financial services provider and close your account(s) as soon as possible," says Milicich.

"As you will not be able to access online statements once your account is closed, we recommend you download them now and continue to do so over the coming months. Our Auckland branch and Wellington office will remain open and our arrangement with Westpac branches nationwide will continue to support you with over-the-counter services."

RBNZ proposing major change

Last August interest.co.nz reported that HSBC, the first overseas bank to gain a banking licence in NZ, could be a high profile casualty of the Reserve Bank's proposals to make banks operating in NZ as branches of overseas banks quit retail banking.

The Reserve Bank's proposed changes could see HSBC having to either incorporate in NZ or quit retail banking. In a submission to the Reserve Bank HSBC said it supported the current policy and acknowledged it; "may need to substantially change strategy in response to such a significant change in the regulatory environment."

An HSBC NZ spokesman told interest.co.nz the decision to exit NZ retail banking wasn't prompted by the Reserve Bank's proposed changes. The review explored a variety of options and the ultimate decision wasn't just about NZ with the HSBC Group having been reviewing various businesses around the world, the spokesman says.

"HSBC will honour all its obligations to existing customers and continue supporting them to ensure a smooth transition."

Quoting HSBC's Chief Financial Officer Georges Elhedery in May, Reuters reported that HSBC was reviewing a potential exit from up to a dozen countries, or one in five of the markets it operated in, to improve focus on Asian expansion. The reviews follow pressure from Chinese shareholder Ping An Insurance, which wants HSBC to prioritise growth in Asia.

Meanwhile a Reserve Bank spokesman said: "HSBC have informed us of their decision. We note that this is ultimately a commercial decision and we have no comment on its perceived merits or otherwise."

Overseas bank branch

HSBC established a branch in NZ in 1987 becoming the first overseas bank branch to be registered here. HSBC operates in NZ as a branch of the Hong Kong-based Hongkong and Shanghai Banking Corporation Ltd, with its ultimate non-bank holding company being HSBC Holdings PLC of the United Kingdom.

Overseas banks wanting to operate as a NZ bank can apply to the Reserve Bank to register as either a locally-incorporated subsidiary, or as a branch of the overseas bank. Albeit in some cases an overseas bank is allowed to register both a subsidiary and a branch, which is referred to as dual registration.

As the Reserve Bank puts it, the key difference between a locally-incorporated subsidiary and a branch is that the branch is part of a legal entity incorporated overseas. The branch operates its banking business in NZ, which is the host jurisdiction, but the legal entity of which it is part is incorporated in another country, which is its home jurisdiction.

"As a result, branches cannot be made subject to many of the requirements we impose on banks incorporated in New Zealand. We rely on a branch’s compliance with regulation and supervision in its home jurisdiction," the Reserve Bank says.

The Reserve Bank is reviewing its policy for branches of overseas banks, proposing that all branches of overseas banks operating in NZ be restricted to wholesale business with corporates, institutions and other wholesale investors, meaning they couldn't take retail deposits or offer products or services to retail customers.

Final policy decisions will be published in the second half of 2023, the Reserve Bank says.