HONG KONG: Hong Kong needs to watch carefully for any further “spillover” from US regional banks, although the city has very little exposure to the situation in European and US financial institutions, the Hong Kong Monetary Authority said on Friday (Mar 24).
The failure of two US banks and a crisis at Credit Suisse have rattled financial markets over the past week and sent shockwaves through the global banking system.
Eddie Yue, the chief of Hong Kong’s de facto central bank, said the city has little exposure to Additional Tier 1 (AT1) bonds – a type of contingent convertible debt that are part of the capital buffers that regulators require banks to hold to protect themselves in times of market turmoil.
Asian policymakers are scrambling to calm investor nerves about AT1 bonds after holdings of such Credit Suisse bonds were written down to zero, but the ongoing market turbulence is likely to keep a lid on fresh debt issuance.
“The recent events in the US and Europe have very little impact on Hong Kong,” Yue said.
“The situation is largely stabilised, but we still need to watch whether there will be further spillover, especially to the other US regional banks.”
Hong Kong and global banks needed to be prepared for any further volatility in the market, he added.