HSBC has chosen Birmingham as the headquarters for the ringfenced UK retail and commercial banking business it is setting up, in a move that will involve relocating 1,000 jobs from London.

The government has told banks to insulate their retail operations from riskier investment banking activities by 2019, with the aim of avoiding any future need for a taxpayer bailout of failed lenders if financial crisis strikes.

The change was recommended by the Vickers commissionset up in the first year of the coalition government, and is likely to involve the creation of separate entities, each with their own board of directors, under a single holding company.

HSBC confirmed it had selected Birmingham after reviewing a number of locations. UK chief executive António Simões told staff in a memo sent on Tuesday.

“Given that the customer base, employees and branch network of the ringfenced bank cover all of the UK, London isn’t necessarily the best place for the head office,” he said.

Negotiations to acquire a 250-year lease on a new 210,000 sq ft office building in Birmingham’s Arena Central enterprise zone in the city centre are under way. Development of the site is due to start by June 2015, with staff relocating in mid-2017. HSBC already employs 2,500 people in Birmingham.

“The city is going through a revitalisation that makes it an attractive destination for businesses and our people,” Simões told staff.

The group has yet to announce who will run its ringfenced bank, which will have its own chief executive, chairman and board of directors.

HSBC reorganised in 2011 along four global lines: retail banking and wealth management; commercial banking; global banking and markets; and the global private bank. Each of these business lines is overseen in the UK by Simões, and around 48,000 of HSBC’s 257,000 staff work in Britain.

The core of HSBC’s UK business originated in Birmingham. In 1993, the company previously known as the Hong Kong and Shanghai Banking Corporation massively expanded its UK operations by acquiring Midland Bank.

Founded in 1836 as the Birmingham and Midland Bank, it had expanded to become the largest lender in the world during the first half of the 20th century, with an empire that came to include the Thomas Cook travel agency, before financial difficulties forced a sale to HSBC.

The bank said in a statement: “HSBC has consulted with the unions and is committed to supporting employees throughout this process. It will work closely with the city of Birmingham to provide information to employees who are considering relocating.”

Meanwhile, taxpayer-owned Royal Bank of Scotland has upset unions by announcing plans to move a further 140 jobs to Poland and India. The relocated jobs will be in back-office functions, including payments. RBS said all affected staff had been found work elsewhere in the bank. “There are no job losses as a result of today’s announcement,” the bank stated.

RBS already has 12,000 employees in India, around one fifth of its workforce, and 1,500 workers in Poland. It has cut 30,000 jobs since the bailout in 2008, the Unite union said.

“It is unjustified that the majority-taxpayer-owned bank is exporting jobs abroad and cutting staff across the UK,” said Unite national officer Rob MacGregor.

This article was written by Juliette Garside, for on Tuesday 24th March 2015 16.47 Europe/London © Guardian News and Media Limited 2010