HSBC made the observation in a submission to the British Banking Commission, established to assess the state of the finance industry, which has been rocked by recent scandals -- including manipulation of the benchmark Libor lending rate and careless policies that allow drug cartels and rogue nations to use British banks for money laundering, The Daily Telegraph reported Saturday.
"Sector capital allocation to the U.K. is at risk of being diverted to other banking markets if current issues are not expeditiously addressed," the bank said.
Banks could leave London and "there is also a risk of some U.K.-headquartered companies following the move ... to those competing centers," the report said.
The Banking Commission, chaired by Andrew Tyrie, chairman of the Treasury Select Committee, is expected to complete a report by the end of the year on the state of the financial sector for parliament.
The U.S. Office of the Comptroller of the Currency, the Justice Department and the Manhattan district attorney's office are investigating transactions at major banks that reveal patterns of money laundering, The New York Times reported last week.
The Senate Permanent Subcommittee on Investigations said in July HSBC had put U.S. security at risk by channeling money through its system that was tied to a Saudi Arabian bank with connections to terrorism.