Hong Kong Special Adminstrative Region Chief Executive John Lee Ka-chiu is on the stage at Guoyi Hotel, Beijing, capital of China on March 15, 2023. Lee offered reassurances on March 21, 2023 that the fallout will not affect the SAR in any significant way, in light of the city's resilient banking system and the lender's limited business in the city. (XUE JINGQI / CHINA DAILY)
Hong Kong’s banking system is resilient enough to weather the storm caused by Credit Suisse’s collapse, the government of the Hong Kong Special Administrative Region and industry insiders said. But a local expert has cautioned that any self-fulfilling prophecy could prove crippling to investors’ confidence.
Hong Kong Chief Executive John Lee Ka-chiu offered reassurances on Tuesday that the fallout will not affect the SAR in any significant way, in light of the city’s resilient banking system and the lender’s limited business in the city.
UBS, the Switzerland’s biggest bank, announced it will acquire its crisis-stricken rival for 3 billion Swiss francs ($3.25 billion), in an emergency rescue deal, about 60 percent less than the value of the embattled bank when markets closed on Friday
UBS, the Switzerland’s biggest bank, announced it will acquire its crisis-stricken rival for 3 billion Swiss francs ($3.25 billion), in an emergency rescue deal, about 60 percent less than the value of the embattled bank when markets closed on Friday.
While the collapse of the 166-year-old bank, the second-largest lender in Switzerland and in Asia, has affected financial markets globally, with account holders reportedly withdrawing deposits of more than $10 billion each day over the last week, the implications for Hong Kong are moderate and manageable, Lee said.
“The banking system in Hong Kong is very resilient and properly regulated,” Lee said in response to the merger of UBS and Credit Suisse.
“The size of Credit Suisse’s business and their assets under management in Hong Kong are relatively small. The banking sector is operating smoothly and normally. The liquidity of the market is also very abundant. So, both the Hong Kong Monetary Authority and the Securities and Futures Commission are monitoring the situation closely. We will be managing the risks,” he said.
Acutely aware of the insidious crisis and the panic reverberating through the markets as a result of Credit Suisse’s collapse, Lee insisted that the situation will be kept in check, with the intervention of the Swiss National Bank and other six central banks who “have indicated that they will be providing sufficient US dollar liquidity to the market.”
“We are in regular communication with different authorities around the world. So we will be having first-hand information about the situation of the market … It is important for everybody to know that the adequacy and liquidity level of the Hong Kong financial and banking sectors are very healthy and abundant to be able to handle the pressure in the market,” Lee said.
While Credit Suisse’s operation in Hong Kong is said to be running as normal and it started its investment conference in the city as planned on Tuesday – with no media being invited – its employees are likely to bear the brunt of the bank’s collapse. Credit Suisse employed over 50,000 people globally at the end of 2022 across wealth management, investment banking and asset management operations, with a presence in more than 150 offices in 50 countries.
Even before the forced merger, Credit Suisse was reportedly in the process of slashing 9,000 jobs to survive. The merger will see duplication in the global operations performed by the estimated combined 125,000 staff, many of whom face the prospect of redundancy.
“The exact number of employees at its Hong Kong office is unknown but job cuts are a sure thing,” said Terence Chong Tai-leung, an associate professor at the Chinese University of Hong Kong’s economics department and executive director of the Lau Chor Tak Institute of Global Economics and Finance. However, it won’t be a “tall order for them (the affected workers) to land another job, with their qualifications and experience,” Chong said.
What he’s agonizing over most is the panic caused by the sensational narrative about the bank’s collapse. The anxiety enveloping global banking has led many of the industry’s biggest shareholders to sell their stakes and wealthy clients to withdraw funds.
“Hong Kong has non-substantial exposure to Credit Suisse and the ramifications shall be tolerable and controllable,” Chong said. But, he stressed, the widespread panic creates a sort of self-fulfilling prophecy, which could be the most debilitating. “A rumor or any subsequent hysterical angst could crumble a healthy bank,” Chong said. HSBC suffered a dramatic slump in shares in Credit Suisse, so did Standard Chartered.
So, it’s less about if our banking system is wholesome and robust, and more about if the information is delivered appropriately and whether the response is misplaced or not, Chong suggests.
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