Overseas banks push back on HKMA's new deposit base rule
HKMA's new funding requirement may force loan business offshore as it puts international banks at a disadvantage over local institutions
The Hong Kong Monetary Authority's fears about mainland exposure could drive international loan business to competing financial centres, according to market players.
In January, the HKMA introduced its Stable Funding Requirement, which requires banks in Hong Kong to increase their deposit base if their loan book grows by more than 20 per cent per year. The provision was rolled out to limit banks' ballooning exposure to mainland borrowers in the context of credit tightening and slowing economic growth across the border.
Bankers at international institutions complain that the rules disadvantage their firms, which typically have little or no branch network in Hong Kong from which to gather deposits.
"I think this was poorly handled by the HKMA," said a head of loan syndications at a large regional bank. "All the local [banks] are in good shape. But those without a deposit base have to raise more deposits, which is not easy and it's expensive."
Janet Field, managing director of the Asia Pacific Loan Market Association, a trade body representing loan banks, said the group had met with the HKMA to discuss these issues, but the regulator had denied it was imposing any form of quota.