Hong Kong banks seek longer-term funds to match loan duration after tightening

Banks in Hong Kong are seeking billions of dollars in long-tenor funding to cope with the newly tightened liquidity requirements of the Hong Kong Monetary Authority.

The rules would have a greater impact on wholesale banks, which do not have a sufficient deposit base relative to their loan growth, said Andrew Fung Hau-chung, an executive director of Hang Seng Bank.

"Those banks will have to increase their long-term funding either by borrowing from parent groups or issuing bonds in the capital market," Fung said.

The city's de facto central bank said last week that the value of loans extended in the first eight months of this year increased 18.8 per cent. It also said it would require banks to secure funding that more closely matched their lending books.

The HKMA said it expected more than 20 banks might be required to boost funds from their stable funding source, depending on their full-year loan growth.

Banks with an aggressive lending strategy - that is, total loans in excess of 70 per cent of total customer deposits - would need to be proportionally funded by stable term funding with remaining maturity beyond six months, according to the authority.

Paul Wong, the chief of treasury at Shanghai Commercial Bank, said he expected the HKMA to trim credit growth to the low-teens annually, from about 20 per cent or more in recent years.