Dividend cancellation by HSBC and Standard Chartered triggers more questions for HK Govt

Maria Nikolova

Hong Kong’s Secretary for Financial Services and the Treasury faced a question on whether the authorities would take measures to attract the two banks to relocate their domiciles back to Hong Kong.

Shortly after Hong Kong’s Secretary for Financial Services and the Treasury, Mr Christopher Hui, had to answer questions on whether the authorities will urge HSBC reconsider its decision of not making dividend payments, the official was faced with more questions regarding the cancellation of dividend payments by banks.

Today, Mr Christopher Hui, provided a written answer in the Legislative Council in response to questions by the Hon Luk Chung-hung. The questions related to the decisions of the boards of HSBC Holdings plc and Standard Chartered PLC, both of which are incorporated in the United Kingdom and listed in Hong Kong, to cancel their final dividend payments for 2019 which were already announced, and to suspend any quarterly or interim dividend payments for the coming year.

The question is “whether the authorities will review the roles of the two subsidiaries in Hong Kong’s financial industry and take measures to attract the two banks to relocate their domiciles back to Hong Kong; if so, of the details; if not, the reasons for that?

In his answer, Mr Christopher Hui explains that HSBC Holdings plc (HSBC) and Standard Chartered PLC (SCB) are international banking groups incorporated in the United Kingdom and regulated by the Prudential Regulation Authority (PRA) of the Bank of England. The Hong Kong Monetary Authority (HKMA) has requested the Hong Kong branch of HSBC and SCB to reflect the concerns expressed by the shareholders in Hong Kong to the banking groups. The HKMA has also informed the PRA about the concerns expressed by the shareholders in Hong Kong through their regular communications.

The HKMA has been adopting a risk-based approach in regulating banks in Hong Kong, including the banking subsidiaries of HSBC and SCB incorporated in Hong Kong, to evaluate their safety and soundness, risk-management systems and internal control, with a view to promoting the stability and integrity of the financial system in Hong Kong. Also, note-issuing banks have to fulfill a set of stringent requirements, including those relating to US dollar reserve, banknote storage, distribution and security, etc. The existing arrangement has been operating smoothly and the HKMA does not have plan to make any changes, Mr Christopher Hui says.

“The Government welcomes international financial institutions to incorporate and set up their headquarters in Hong Kong, although whether to set up their global headquarters in Hong Kong or not remains a commercial decision of individual banks”, Mr Christopher Hui concluded.

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