Reports of HSBC’s looming departure from Malta were seemingly confirmed last week, with HSBC Malta telling its shareholders that the bank was in discussions with “a number” of bidders.
APS bank promptly threw its hat in the ring, announcing that it had submitted an offer for the 70.03 per cent stake in HSBC Bank Malta currently held by HSBC Continental Europe.
Caught in the middle were countless confused customers of both banks left wondering what this all means for their own savings, investments and loans.
We spoke to several banking experts to figure out what it means for customers when two banks hammer out a deal.
Are customers’ accounts affected?
The short answer is not really.
The most likely scenario, whenever one bank takes over another, is that anyone who banks with either bank would simply have all their business with the bank – savings, investments, loans, and any other policies – shift seamlessly to the new reality.
This is what happened when HSBC first landed in Malta back in the late 1990s, buying out a 67 per cent stake in Mid-Med Bank in a controversial takeover, experts say.
In practice, Mid-Med Bank customers became HSBC customers virtually overnight, with no significant change to any of their daily dealings with their bank.
Sometimes changes can be almost imperceptible.
Eagle-eyed HSBC customers might also notice that their bank’s SWIFT code – the code used to identify the bank in international transactions – opens with the letters MMEB, rather than HSBC, as would customarily be the case.
This is a remnant from the bank’s Mid-Med days, with HSBC holding on to the same banking licence and SWIFT code that the previous bank had once it took over.
Whether whoever takes over from HSBC retains the same banking licence remains to be seen but, in any case, most customers are likely to experience little disruption to their daily banking activities.
But will things change over the longer term?
It depends. Experts say that this ultimately boils down to what sort of business strategy the new bank would want to pursue.
HSBC frequently describes itself as a “community bank”, and whoever takes over may well decide to continue along the same road, servicing home loans, personal investments, retailers, and so forth.
But experts say that a new bank could also choose to take a different approach altogether, for instance by gradually shrinking its personal and retail banking portfolio to focus on investment banking instead.
This sort of shift in strategy would likely mean gradual changes to how the bank operates. So the new bank could, for instance, become a little stingier when handing out personal loans, or it may choose to prioritise servicing some industries over others.
But, with questions remaining over who would eventually take HSBC’s place, it would be premature to suggest that this will happen.
When does the regulator step in?
As one of Malta’s three systemic banks – banks that are considered too big to fail – HSBC is under the tight scrutiny of the European Central Bank, so any sale would need to have the ECB’s blessing.
That’s not to say that Malta’s regulator, MFSA, has no say in the matter. Typically, ECB and MFSA would team up to jointly supervise the process before a sale is approved.
ECB’s scrutiny is no small matter.
Banking experts say that a routine inspection by the ECB into one of Malta’s systemic banks could last anywhere from two to four months at a go.
And its supervision over the sale of a bank could be significantly lengthier, typically taking over a year to complete and, in some cases, lasting up to two years.
The level of scrutiny would also depend on who HSBC’s buyer happens to be and the complexity of the deal. A private equity fund buying into a bank is usually looked at under a tighter microscope compared to when one bank buys out another, experts say.
Some have suggested that an eventual deal between HSBC and APS could also face other regulatory hurdles, most notably concerns over competition. Whether this is the case, and whether this would lengthen the process further, remains to be seen, but it is likely that APS negotiators will have factored this into their thinking when submitting their bid.
Ultimately, before giving its green light, the ECB would need to have its mind at rest that whoever is buying HSBC can successfully manage a bank of its size and implement all the safeguards that that entails.
What will happen to the bank’s staff?
Reports of the sale are likely to have left many of HSBC Malta’s 920 employees wondering what this means for their future. And what the over 600 employees on APS’ books made of the news that their bank could suddenly double in size is anybody’s guess.
As in the case of any company takeover, Malta’s employment laws place safeguards around employees’ rights, meaning that new owners cannot tinker with people’s jobs at will once they take the bank’s reins.
For instance, the law says that a business changing hands doesn’t give either the buyer or seller the right to dismiss employees, and the buyer is obliged to honour all obligations that the seller had towards its employees.
But what this will mean years down the line remains to be seen.
Experts say it is fair to expect that there will be some rejigging of personnel and roles once when a bank is taken over, if nothing else to avoid the duplication of roles and responsibilities.
Just how extensive this rejigging would be is impossible to tell at this point, but unions will no doubt be keeping a close eye on any developments, with the Malta Union of Bank Employees calling for “transparency and fairness” in the interest of bank employees.