Hong Kong brings run on banks under control

A concerted effort by the Hong Kong government, the regulatory authorities and the territory's big banks appears to have averted a potential bank run but it remains uncertain whether the banking sector is yet out of the woods. Stephen Vines in Hong Kong reports.

The beginnings of a run on the International Bank of Asia (IBA) and some of Hong Kong's smaller banks appears to have been brought under control, following a full scale mobilisation by the government and other banks to provide both verbal support and offers of hard cash for any bank encountering problems as a result of the current turmoil in Asian financial markets.

Sir Donald Tsang, the Financial Secretary, yesterday spelled out the level of the government's commitment to ensure there were no bank failures.

He said that Hong Kong's Exchange Fund, with assets exceeding pounds 45bn, "stands squarely behind this institution [IBA] and will provide all the necessary financial support it may require to meet its obligations for as long as is necessary".

He described the bank as a "well managed, well capitalised banking institution". Sir Donald's boss, the Chief Executive Tung Chee-hwa, also emerged yesterday to say "the banking system in Hong Kong is fine and this particular bank is fine".

He added: "Because of rumours there are uncertainties among ordinary people which is understandable but they are more driven by rumours".

The bank faced a second day of queues with people wishing to close their account. It has reacted calmly to the crisis, quickly meeting all demands for withdrawals, even allowing customers to redeem time deposits before their due date and extending banking hours to clear the queues.

It says that the situation more or less returned to normal yesterday and that it has sufficient resources to meet any demands for withdrawals.

The IBA is a fast-growing, medium-sized bank, controlled by one of the biggest banks in the Middle East, the Arab Banking Corporation. China Everbright Holdings, one of China's largest state-owned conglomerates, is a 20 per cent shareholder.

The parent company has pledged full support to its associate and transferred a "substantial" amount of cash to Hong Kong.

However, there is clearly pressure on the banking sector and a fear of accumulating bad loans as property prices take a dive and speculators get their fingers burned. For this reason the credit rating agency Moody's is currently reviewing its ratings for Hong Kong banks.

However, yesterday the Standard & Poor's credit rating agency published a report which stated that it was maintaining its relatively high credit ratings for territory's banks and believed that "the volatile nature of both the property market and the stock market in Hong Kong has always been taken into account in the rating of Hong Kong banks".

Relief over the situation in the banking sector produced a mood of cautious optimism in the stock market with the blue-chip Hang Seng Index closing barely changed after a day of mixed trading. Other Asian markets also inched upwards yesterday.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Service Administrator

£13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...

Recruitment Genius: Dialler Administrator

£22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...

Ashdown Group: Contracts Manager - City of London

£35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...

Guru Careers: Tax Manager / Accountant

£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

Day In a Page

Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen
RuPaul interview: The drag star on being inspired by Bowie, never fitting in, and saying the first thing that comes into your head

RuPaul interview

The drag star on being inspired by Bowie, never fitting in, and saying the first thing that comes into your head
Secrets of comedy couples: What's it like when both you and your partner are stand-ups?

Secrets of comedy couples

What's it like when both you and your partner are stand-ups?
Satya Nadella: As Windows 10 is launched can he return Microsoft to its former glory?

Satya Nadella: The man to clean up for Windows?

While Microsoft's founders spend their billions, the once-invincible tech company's new boss is trying to save it
The best swimwear for men: From trunks to shorts, make a splash this summer

The best swimwear for men

From trunks to shorts, make a splash this summer
Mark Hix recipes: Our chef tries his hand at a spot of summer foraging

Mark Hix goes summer foraging

 A dinner party doesn't have to mean a trip to the supermarket
Ashes 2015: With an audacious flourish, home hero Ian Bell ends all debate

With an audacious flourish, the home hero ends all debate

Ian Bell advances to Trent Bridge next week almost as undroppable as Alastair Cook and Joe Root, a cornerstone of England's new thinking, says Kevin Garside
Aaron Ramsey interview: Wales midfielder determined to be centre of attention for Arsenal this season

Aaron Ramsey interview

Wales midfielder determined to be centre of attention for Arsenal this season
Community Shield: Arsene Wenger needs to strike first blow in rivalry with Jose Mourinho

Community Shield gives Wenger chance to strike first blow in rivalry with Mourinho

As long as the Arsenal manager's run of games without a win over his Chelsea counterpart continues it will continue to dominate the narrative around the two men
The unlikely rise of AFC Bournemouth - and what it says about English life

Unlikely rise of AFC Bournemouth

Bournemouth’s elevation to football’s top tier is one of the most improbable of recent times. But it’s illustrative of deeper and wider changes in English life
A Very British Coup, part two: New novel in pipeline as Jeremy Corbyn's rise inspires sequel

A Very British Coup, part two

New novel in pipeline as Jeremy Corbyn's rise inspires sequel
Philae lander data show comets could have brought 'building blocks of life' to Earth

Philae lander data show comets could have brought 'building blocks of life' to Earth

Icy dust layer holds organic compounds similar to those found in living organisms