Fitch: Global Tightening to be Manageable for Hong Kong Banks

Wed Apr 9, 2014 9:02pm EDT

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(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Hong Kong Banks Maintain Healthy Liquidity here HONG KONG, April 09 (Fitch) Fitch Ratings says in a new report that the impact on Hong Kong banks from global monetary tightening should be manageable. Robust deposit composition, a high proportion of liquid assets and low dependency on capital market and foreign bank funding provide stability and mitigate liquidity risks. However, the banks' loans and other claims in mainland China have been growing quickly, which increases their sensitivity to spill-over effects from stresses on the mainland banking system. Fitch expects the Hong Kong banks to maintain sound funding structures by limiting deposit concentrations and increasing longer-term funding. Fitch-rated banks should easily withstand more volatility as retail and resident deposits dominate and reliance on foreign bank funding will remain stable. Their expanding open position to mainland China resulting from tighter liquidity conditions in China and buoyant cross-border activities render Hong Kong banks more susceptible to liquidity risks in China. Fitch views the imbalance between Hong Kong banks' claims on mainland banks and funding provided by the latter as an increasingly structural feature. Hong Kong banks' large liquidity buffers should bode well for the regulatory liquidity stress test in the coming year. Among Fitch-rated banks, Industrial and Commercial Bank of China (Asia) Ltd (ICBC Asia; A/Stable), China CITIC Bank International Limited (CNCBI; BBB/Stable) and DBS Bank (Hong Kong) Limited (DBSHK; AA-/Stable) have improved their liquidity buffers the most during 2009-2013. For these three banks, short-term interbank assets accounted for the bulk of liquefiable assets. The report, 'Hong Kong Banks Maintain Healthy Liquidity - Deposits a Major Funding Source; China Interbank Risk', is available at www.fitchratings.com, or by clicking on the link above. Contacts: Ivan Lin Associate Director +852 2263 9984 Fitch Ratings (Hong Kong) Limited 2801, Tower Two, Lippo Centre 89 Queensway, Hong Kong Chikako Horiuchi Director +852 2263 9924 Sabine Bauer Senior Director +852 2263 9966 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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