HONG KONG (Reuters) – Hong Kong must watch carefully for further “spillovers” from US regional banks, although the city has been very little affected by the situation at European and US financial institutions, the Hong Kong Monetary Authority said on Friday.
The collapse of two US banks and a crisis at Credit Suisse rocked financial markets last week, sending shock waves through the global banking system.
Eddie Yue, head of Hong Kong’s de facto central bank, said the city has little exposure to Additional Tier 1 (AT1) bonds — a type of conditionally convertible debt that is part of the capital buffers that regulators require banks to to protect yourself in times of market turbulence.
Asian policymakers are scrambling to calm investor jitters over AT1 bonds after Credit Suisse’s holdings of such bonds were written down to zero, but ongoing market turmoil is likely to stifle new bond issuance.
“Recent events in the US and Europe have had very little impact on Hong Kong,” Yue said.
“The situation has largely stabilized, but we still have to observe whether there will be further attacks, particularly on the other US regional banks.”
Hong Kong and global banks must be prepared for further market volatility, he added.
(Reporting by Donny Kwok and Anne Marie Roantree; Editing by Jacqueline Wong and Christopher Cushing)
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