Evergrande crisis: Hong Kong banks can handle stress as they have little exposure to troubled Chinese developer, source says

HKMA says banks in Hong Kong have hardly extended loans to China Evergrande Group, which is struggling with debts of over US$300 billion

HSBC and Standard Chartered executives told a banking conference last week that they have negligible exposure to Evergrande

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China Evergrande Group is struggling with a debt burden of more than US$300 billion. Photo: AFP

Published: 8:38pm, 29 Sep 2021Updated: 7:31pm, 4 Oct 2021

Hong Kong’s banking sector can withstand the crisis surrounding China Evergrande Group, as local lenders have little exposure to the troubled mainland developer, thanks to repeated warnings from the Hong Kong Monetary Authority in the past to beware of risks related to highly leveraged companies, according to a source familiar with the situation.

Executives from HSBC and Standard Chartered last week told a banking conference they had little lending exposure to Evergrande.

The city’s de facto central bank has also been closely monitoring credit-related developments at the Shenzhen-based developer, which is on the verge of defaulting on bond interest payments amounting to over US$83.5 million, the source said. Banks have heeded the HKMA’s warnings, resulting in local lenders having little lending exposure to Evergrande, the source added.

“The HKMA has been closely monitoring the credit risks facing the banking sector,” Arthur Yuen Kwok-hang, deputy chief of the HKMA, said at a seminar on Tuesday, without naming any company. “Our assessment is that the overall risk to banking stability remains manageable.”

Hong Kong banks’ exposure to Evergrande is negligible, according to the HKMA. Photo: Shutterstock

An HKMA spokeswoman declined to comment on individual companies.

Evergrande, the world’s most indebted developer, currently has over US$300 billion in liabilities, compared with 2.38 trillion yuan (US$369 billion) in assets.