Crisis, what crisis? Hong Kong’s banks remain ‘profitable and solid,’ HKMA says, calling the bluff on short sellers’ doomsday prediction

The pre-tax profit of all Hong Kong’s retail banks rose 1.8 per cent in the first nine months of 2019, while the capital ratio is over 20 per cent, among the highest worldwide

Saying HK banks are heading for crisis is ‘groundless’, says HKMA deputy chief executive Arthur Yuen as he unveils data for the sector

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‘Hong Kong’s banking sector is among the safest worldwide,’ says Arthur Yuen, deputy chief executive of the city’s de facto central bank. Photo: Getty Images/iStockphoto

Published: 6:00pm, 17 Jan 2020Updated: 10:50pm, 17 Jan 2020

Hong Kong’s banks were among the world’s best capitalised last year, and local currency deposits rose even amid an unprecedented political crisis, according to the city’s de facto central bank, as it called the bluff on doomsday predictions by short-sellers of an imminent banking crisis.

The capital adequacy ratio of Hong Kong’s banks stood at 20.9 per cent last year, among the highest worldwide, according to the annual banking review by the Hong Kong Monetary Authority (HKMA). Local currency deposits rose 2.9 per cent, while the industry’s aggregate bad loans ratio fell by 0.04 percentage point to 0.56 per cent in September from a year earlier, among the lowest in the world, the data showed.

“Hong Kong’s banking sector is among the safest worldwide,” said the HKMA’s Deputy Chief Executive Arthur Yuen, during a press conference. “The data shows that Hong Kong’s banking sector is profitable and solid, even amid the challenging operating environment and the social unrest during the past seven months.”

The assessment would be a rebuff of the dire prediction by short-seller Kyle Bass, the hedge fund manager who had been forecasting Hong Kong’s “full-fledged banking crisis” in 2020, much like the financial crisis encountered by Iceland and Ireland a decade ago, according to a Bloomberg report.

Arthur Yuen Kwok-hang, Deputy Chief Executive of Hong Kong Monetary Authority (HKMA), during a technical briefing on virtual banking at the HKMA Auditorium in Central on 30 May 2018. Photo: Jonathan Wong

“For someone to describe the safest banking sector in the world [as facing] a crisis is just groundless, and is not based on real data and figure,” said Yuen, who is responsible for banking regulation at the monetary authority. “There are comments from time to time about the fragility of the local banking sector, usually due to misunderstanding about our banking and currency system, while some are just not based on facts and figures.”

The data also underscores how Hong Kong’s capital markets have continued to withstand the headwinds from the city’s economy, in its first technical recession in a decade as a year-long US-China trade war and seven months of anti-government protests have combined to put the squeeze on retail sales and consumption.