HK On Watch For Banking Trouble Spillover: Eddie Yue

Hong Kong Monetary Authority chief Eddie Yue says the SAR needs to watch carefully for any further "spillover" from US regional banks, but the city has very little exposure to the situation in European and US financial institutions.

The international banking industry has been rattled by this month's collapse of Silicon Valley Bank and Signature Bank, and the knock-on from those failures that prompted the Swiss government to step in to force UBS to take over its troubled rival, Credit Suisse.

But Yue told reporters on Friday that Hong Kong has only a limited exposure to the three banks.

“Our banks have only very limited exposure to all the banks that are now featured in the newspapers. But I note that in both the US and Europe, relevant authorities have taken very strong measures to contain the spillover effect,” he said.

“The situation has largely stabilised, but we still need to watch whether there will be further spillovers, especially to other US regional banks. Currently they are okay. The liquidity has been expanded. But whether there will be other changes, we need to monitor [this].”

Yue also said he doesn’t think the Swiss regulator’s instruction for Credit Suisse to write down US$17 billion worth of AT1 bonds poses any risk to Hong Kong’s banking sector.

“We’ve done a quick survey. The banks’ holdings of AT1 bonds are very small in Hong Kong. The total amount they are holding constitutes only one percent of their overall bond holdings. And again, the exposure to individual institutions will be even more limited if the overall is only one percent.”