London: The State Bank of India (SBI) has announced the launch of its UK subsidiary, SBI (UK) Ltd, with an initial capital commitment of £225 million from its parent entity.
India’s largest state-owned bank, which celebrated the new subsidiary with a special event in London on Monday, becomes the first foreign bank in the UK to ringfence its retail division from its wholesale business.
SBI said that the ringfencing and subsidiarisation of the retail franchise SBI UK, the bank’s largest overseas operation, offers UK customers “stability and reassurance" amid continuing uncertainty around the UK’s decision to leave the European Union (EU).
“We are extremely proud of how far the bank has come from the first time it opened its doors to UK residents in 1921," said Sanjiv Chadha, regional head of SBI UK. “The launch of our UK subsidiary shows our commitment to operate in the UK market. Many banks primarily see the UK as the gateway to Europe and are fazed by the impact of Brexit. Our calculus is different. We see London as the ideal launch pad for a global presence and have full faith that, despite Brexit, London will remain the premier international financial centre," he said.
The UK subsidiary of the SBI has been launched with an initial capital commitment of £225 million from its parent entity. The UK’s Prudential Regulation Authority (PRA) wants foreign banks to establish UK subsidiaries to protect depositors in the UK from uncertainties in foreign markets. It is aimed at preventing a repeat of the financial crisis, by ensuring that banks have enough capital to support their business.
The costly move has caused an industry uproar, leading many existing foreign-owned bank branches to reassess their presence in the UK. However, SBI UK says it has chosen to view the restructuring as an endorsement for London as a financial capital of the world, despite uncertainty triggered by the Brexit.
Charles Bowman, Lord Mayor of the City of London, said: “The move is a reflection of the continued strength of UK-India ties, particularly in financial and professional services. I look forward to further building on our 100-year relationship with India’s largest bank."
SBI UK, as the largest Indian bank in the UK, said it is confident that London will continue to remain the pre-eminent financial capital for institutions seeking a “gateway to a global presence".
The new subsidiary, which came into effect on 1 April, means that all retail branches of SBI in the UK will fall under a new UK-incorporated banking entity instead of their previous status as overseas branches of the Indian entity.
“The UK market is one of tremendous interest and promise to us and that is unchanged regardless of Brexit. London is the best place for us to base our international business in, we find the regulatory climate proportionate and supportive," Chadha said.
SBI operates seven branches in London and five each in Manchester, Birmingham, Wolverhampton, Leicester and Coventry—all cities with a large concentration of Indian diaspora population.
The bank says that while the Indian-origin customer base will remain at the heart of its operations, it will use its expansion to cater to the wider UK market as a competitive local bank. PTI