Pressure is mounting on HSBC and Standard Chartered as the banks find themselves ‘caught in the crossfire’ of a diplomatic row centred on Hong Kong.
In its latest move against Beijing, the US has proposed sanctions on banks which do business with Chinese officials who are cracking down on pro-democracy protesters in Hong Kong.
And in retaliation against Boris Johnson’s offer to allow 3m Hong Kong citizens to come to the UK, China warned there would be ‘consequences’.
In its latest move against Beijing, the US has proposed sanctions on banks which do business with Chinese officials who are cracking down on pro-democracy protestors in Hong Kong
Foreign Secretary Dominic Raab urged banks on Wednesday not to ‘sacrifice’ Hong Kong’s freedoms in their bid to boost profits in Asia.
Experts fear that major London-headquartered firms may find themselves caught between sanctions from the West, and punishments from Beijing as the Communist regime threatens to use them as pawns in its efforts to win back control of Hong Kong.
Matthew Henderson, director of the Asia Studies Centre at the Henry Jackson Society, said: ‘In the case of Hong Kong, sanctions will target assets managed by British banks, lawyers, and accountants operating within the city.
Foreign Secretary Dominic Raab urged banks on Wednesday not to ‘sacrifice’ Hong Kong’s freedoms in their bid to boost profits in Asia
These institutions will be forced to choose between complying with the sanctions or maintaining their relationships with the system which the sanctions are targeting.
‘The Chinese will very likely react by forcing other British businesses to take sides one way or the other.’
HSBC and Standard Chartered in particular – both of which are headquartered in London, but do most of their business in Asia – have already come under fire from politicians in the UK and the US for supporting a draconian national security law imposed by China on Hong Kong.
Hundreds of people have already been arrested in the territory amid protests this week as the law came into force.
It is feared the laws will encroach on human rights and reduce Hong Kong’s attractiveness as a financial centre.
But British lenders in the region found themselves in an interminable bind, as China reportedly threatened to curtail their ability to do business there unless they supported the law.
Raab said in Parliament: ‘I’ve been very clear in relation to HSBC and I also say the same thing in relation to all of the banks: the rights and the freedoms and our responsibilities in this country to the people of Hong Kong should not be sacrificed on the altar of bankers’ bonuses.’
HSBC and Standard Chartered have already come under fire from politicians in the UK and the US for supporting a draconian new national security law imposed by China on Hong Kong
The move by US lawmakers to introduce sanctions on banks which work with certain Chinese officials will put HSBC and Standard Chartered in an even stickier spot.
Benedict Rogers, deputy chairman of the Conservative Human Rights Committee and co-founder of Hong Kong Watch, said: ‘My understanding is that the US sanctions are principally aimed at Chinese financial institutions and not the international banks like HSBC at this stage.
‘But clearly if HSBC behaves more and more like a Chinese bank because of the pressure from the Chinese regime, then they could find themselves affected by it.’
The heightened tensions between China and the US are particularly problematic for HSBC, which effectively connects the financial plumbing between New York and Hong Kong and facilitates smooth trading between the East and the West.
Matt Kilcoyne, deputy director of think-tank the Adam Smith Institute, said: ‘Firms like HSBC and Standard Chartered preach corporate responsibility in the West, but then they turn their back on human rights in countries where that’s less in favour.
‘That has now come back to bite them, as they find themselves increasingly caught in the crossfire.
‘They have to make a decision between the banking system of the West and that in Beijing, and that will be difficult because they make most of their profits in Asia.
‘But they also have a duty to their customers and shareholders in the West, who expect them to uphold proper corporate practice and human rights around the world.’
He added that HSBC’s position on Hong Kong was a ‘kick in the teeth’ for its UK customers and shareholders, and that he knew ‘a lot of people’ who had switched from HSBC to another bank in recent months.
Kilcoyne said: ‘These banks do make a lot of money in Asia – but if they’re going to lose a lot of customers over this in the long term, that’s not good for shareholders.’
Standard Chartered shares climbed 2.6 per cent yesterday, while HSBC went up 4.5 per cent.