Frustrated over increasing costs of regulation, London-based HSBC’s veiled suggestion that it could shift its global headquarters to Hong Kong have been met with support and scepticism.

Just over a week ago, the global bank announced that it was conducting a review of where its headquarters would be, with most outsiders seeing Hong Kong as the obvious alternative to the UK.

A move back to Hong Kong could make for an emotional return of sorts, given HSBC’s current 150-year anniversary celebrations. The bank moved its base to London in 1993 following the acquisition of Midland Bank and in advance of Hong Kong being handed back to China in 1997.

The banking group has seen its image tarnished in recent years after a string of penalties for violations, ranging from money laundering for Mexican drug cartels, to helping the wealthy evade taxes via its Swiss subsidiary.

In addition, the bank has suffered from an increase in a UK tax levy that cost it $1.1 billion last year, and could potentially increase to $1.8 billion by 2017. However, not all fund managers believe that a more relaxed regulatory regime in Hong Kong under the city’s Monetary Authority (HKMA) would make much difference.

“Even if you locate your main global activities in Hong Kong and ring fence the group’s bank in the UK, a lot of activities will continue to be denominated in US dollars. So even if you are in Hong Kong, you’ve got no protection at all against US regulators,” said one fund manager.

“As soon as US regulators see you transact in US dollars, they will be able to have a say in the way you conduct your transactions,” the fund manager added, citing as an example US extraterritorial rules such as the Foreign Account Tax Compliance Act and its ability to bring enforcement against US tax evaders.

Other fund managers agree, but returning home could still give the bank a breather if it was monitored by the HKMA and its more relaxed attitudes on penalising financial institutions.

One case in point is the anti-money laundering ordinance, with the Hong Kong Monetary Authority being able to impose sanctions ranging from a public reprimand to a HK$10 million ($1.29 million) fine – an ordinance which was enacted in 2012 but has yet to be used so far.

This pales in comparison to the fines that HSBC received when it was hit by a £216 million ($327 million) fine from the UK’s Financial Conduct Authority for its role in the rigging of Libor rates.

“If they come back to the city, at least the [Hong Kong Monetary Authority] won’t penalise HSBC [much] for wrongdoings,” said the fund manager. “If they are accused or guilty of tax evasion in Switzerland, whether HKMA can penalise them is something I imagine they have the authority over, but I don’t see it doing something like that.

“Hong Kong cannot protect them from overseas fines and definitely not against the US government, but at least they don’t have to worry about it in their domiciled country like in the UK, which would penalise them.”

But questions have been raised internationally as to whether Hong Kong, with a GDP of $275 billion, is ready to manage HSBC and its global operations, which has $2.7 trillion of assets and has been designated a global systemically important financial institution (G-Sifi).

“Who ultimately will backstop for HSBC? If you look at the crisis, governments became the backstop for banks as they failed. HSBC is huge. Can Hong Kong on its own afford or want to put its economic well-being as the backstop for HSBC?” said another market participant.

“Switzerland has similar problems with UBS and Credit Suisse - that is why their regulators are being so tough on those banks to limit their investment banking businesses [to prevent contagion effect].”

But one consequence of a move could see HSBC negotiate with the People’s Bank of China to become the ultimate backstop, so that China’s central bank could one day bail it out.

Arguably this could give Hong Kong an advantage over rival Singapore, giving China an education in how to oversee a very large complex bank, in comparison to mainland banks, which lack the sophistication of their international counterparts, despite their size.

“Whether that is politically palpable in HK is a big question, but from an economic or technical point of view this could be feasible,” said the market participant.