Across The Border | Hong Kong banks hoard capital as they await new Basel rules
Local lenders likely to be more affected than larger Hong Kong banks, due to lower capital levels and less expertise
Banks in Hong Kong, and indeed the world, are still waiting for new global rules to be finalised, and as a result, hoarding cash rather than returning it to investors, or making use of it in more profitable ways.
Last week, Standard Chartered’s board chose not to issue a dividend, for the fourth half yearly period running and cited the finalisation of the Basel 3 regulations as a major factor.
While uncertainty prevails as to the form the final rules will take, however, analysts suggest that the more locally focussed Hong Kong banks may be more affected than international banks.
The rules come from the Basel Committee on Banking Supervision, an organisation that brings together regulators from 28 countries, and is seeking to standardise the ways in which banks assess the riskiness of their assets, and so the amount of capital they must hold to remain stable.
“The rules are an attempt to stop banks playing the system by using their own models when they assess their capital levels,” said Keith Pogson, senior partner for financial services at EY.
