The move was bitter reminder to Hongkongers that they have little say in matters relating to their city's defence, diplomacy and now, even the dividends paid by some of the world's largest banks. The stocks touch the lives of many Hongkongers who often give HSBC’s shares as graduation or wedding gifts. About a third of HSBC’s shares are held by retail investors.

“I understand it is a tough time but how can a regulator just order the bank to hurt investors. It's not fair,” said Mrs Mak who owns about US$1 million worth of HSBC shares, some of which she inherited from her father who bought the shares more than half a century ago. She asked to be identified only by her last name.

Many of the city’s retirees rely on dividend streams from HSBC and Standard Chartered for a living.

By not paying its final interim dividend of US$0.21 a share on April 14 as planned, HSBC cost its two biggest shareholders, the asset manager BlackRock and Ping An Insurance, roughly US$596 million in dividend income.

The PRA’s actions also reignited the thorny debate about whether HSBC, which is based in London but generates more than half of its revenue in Asia, should move its domicile back to Hong Kong, where it was founded 155 years ago.

“HSBC should move its headquarters back to Hong Kong, so it does not need to listen to what the British regulator says,” Cheung Tin-sang, a 82-year-old broker at Luk Fook Securities (HK), said.

HSBC said on Thursday there are “no discussions” to review HSBC’s global headquarters or reopen the issue of its domicile. The bank opted to keep its headquarters in London in 2016 after taking nearly a year to examine whether to move its home base.

Based on interviews with executives and others, the banks had little choice on Tuesday but to make the decision to accede to the request of their chief regulator – the PRA is an arm of the Bank of England – and had scant time to craft a strategy for relaying the news to investors.

In the wake of the global financial crisis, bankers were seen by politicians to blue-collar workers as both the cause of the crisis and the overwhelming beneficiary of bailouts to keep the financial system from collapsing. Governments are keen to avoid a replay of the bank rescues that cost them votes – even at the expense of private investors.

As the coronavirus pandemic began to drag on economies from Hong Kong to the United States, policymakers have moved fast to make sure banks are able to keep lending to small businesses and homeowners.

A provision of a US$2 trillion stimulus package passed in the United States last week barred companies that receive government-backed loans from paying dividends or buying back shares until a year after they repay those loans.

Eight of the US’s biggest lenders agreed last month to suspend their buy-backs until at least July and the European Central Bank on March 27 asked continental banks not to pay dividends or buy-back shares until October 1, including final payouts for 2019, to boost lenders’ capabilities to absorb losses.

And calls were increasing for the PRA to take similar action, but the regulator had little time to make a decision as the British bank Barclays was set to pay its final dividend for 2019 on Friday.

On Tuesday, the PRA sent a letter to the UK’s seven largest banks and building societies, asking them to reply by 8pm London time if they would agree to suspend their dividend payments and buy-backs. The regulator added it was preparing its own announcement for 9pm that night either way.

“The PRA stands ready to consider use of our supervisory powers should your group not agree to take such action,” the letter said.

The Reserve Bank of New Zealand followed suit on Thursday with its own prohibition on bank dividends, but the Hong Kong Monetary Authority has said a suspension of dividends or buy-backs is not necessary for local banks as the sector is well capitalised to meet lending demands.

Mark Tucker, HSBC’s chairman, said on a conference call with reporters on Wednesday that discussions with regulators had happened over the “last days”, but the bank had little choice but to make the “incredibly difficult decision” to cancel investor payouts.

“The lead regulator was clear about what action they feel is needed to be taken and we have taken that action,” Tucker said.

The PRA said the move was a “sensible precautionary step” to allow banks to continue to support the wider economy through lending. It also gives banks extra headroom to absorb losses and, hopefully, avoid the need for a future bailout.

By not paying the final 2019 dividend, HSBC had an additional US$4 billion in available core tier one capital, a measure of a bank’s financial health, Ewen Stevenson, the HSBC chief financial officer said.

That provided little comfort to investors both big and small who are losing dividend income as a result of the moves by two of the city’s biggest banks.

Tucker said on Wednesday that he did not speak with the bank’s largest shareholders ahead of the announcement. He did call several big investors, including Ping An’s Chairman Peter Ma Mingzhe, on Wednesday to discuss the move and provide context as to why the decision was made, according to a person familiar with the matter who was not authorised to discuss it publicly.

“We note the information and we will follow the situation,” a Ping An spokesman said.

A BlackRock spokeswoman declined to comment on Thursday, saying the world’s biggest asset manager does not discuss individual holdings.

Senior management at Standard Chartered also spoke with the bank's top shareholders following the announcement, according to a person familiar with the matter. Big investors, while disappointed, were not surprised as they had anticipated such a move after other regulators moved to limit bank dividends, according to the person, who was not authorised to discuss the matter publicly.

A spokesman for Standard Chartered's largest shareholder, Singaporean wealth fund Temasek, said: “In these extraordinary circumstances, the decision is understood.”

Citigroup analyst Ronit Ghose said a number of investors, including retail investors, own UK banks, including HSBC, for dividend yield and buy-backs were attractive for investors in Standard Chartered, which announced a US$500 million repurchase programme in February.

“While we do understand the social rationale behind these steps, this regulatory intervention risks leading to further underperformance by UK banks in the near-term, relative to both UK insurers and global banks,” Ghose said in an April 1 research note.

Local brokers in Hong Kong have called on Financial Secretary Paul Chan Mo-po and the Securities and Futures Commission to intervene, according to Christopher Cheung Wah-fung, a lawmaker for the financial services sector and chairman of Christfund Securities.

“I have received over 10 complaints from Hong Kong investors about HSBC's decision. Many of them are diehard fans of HSBC and have owned its shares for many years,” Christopher Cheung said. “They invested their savings in HSBC for its high dividends which is better than bank saving. A suspension of dividend will affect their daily lives substantially.”