HSBC Holdings plc announced a £750 million increase to its capital base from its own resources to further strengthen the already healthy capital position of its UK subsidiary HSBC Bank plc. The move fulfils HSBC’s agreed commitment to meet the UK’s Government’s requirements for increased capital in the UK banking industry overall. The £750 million equity injection represents just one per cent of the total shareholders’ equity of the HSBC Group (as at 30 June 2008).

HSBC’s speedy compliance with the UK Government’s demand that all banks bolster their Tier 1 capital heightens the pressure on its rivals to respond. Most of the bank’s rivals are likely to have to raise additional capital to meet the Government’s demand. Abbey, which is owned by Santander, the Spanish bank, is expected to find a solution similar to that of HSBC. Banks such as HBOS, RBS, Lloyds TSB and Barclays are expected to approach the UK Government this month.

Alan Richards HSBC’s CEO in Malta said, “Although the initiative has no direct impact on HSBC’s operations in Malta, the move demonstrates that, in these challenging times, HSBC’s enduring commitment to financial strength worldwide remains hugely powerful. HSBC’s quick and decisive action by the Group in the UK also shows HSBC’s capital strength which differentiates it from other banks, for the benefit of customers, staff and shareholders alike.”

As previously announced, HSBC has no plans to utilise the UK government’s recapitalisation initiative. The capital injection has been funded from HSBC Group’s own resources. With a tier one capital ratio of 8.8 per cent and a loan to deposit ratio of 90 per cent as at 30 June 2008, the Group remains one of the most strongly capitalised and liquid banks in the world.

In its efforts to continue to support the stabilisation of the financial markets’ operation, over the last few days HSBC has also provided significant amounts of liquidity to the London interbank market, lending around £4 billion to other banks. “The group remains one of the most strongly capitalised and liquid banks in the world,” concluded Alan Richards.