Hong Kong Monetary Authority Issues Statement on Bank Run
Text of report in English by official Chinese news agency Xinhua (New China News Agency)
[Xinhua: "Hong Kong Authorities Move To Quell Rumours Over Bank's Stability"]
HONG KONG, Sept. 25 (Xinhua) – The Hong Kong Monetary Authority said Wednesday that the city’s banking system is safe and sound, a move to quell rumours over the stability of Bank of East Asia, which led to depositor queues.
“Local banks are well capitalized and highly liquid. Their asset quality is good and their operations have been strong. Bank of East Asia’s capital adequacy and liquidity ratios are well above regulatory requirements,” the Monetary Authority said in a statement.
Hundreds of local residents queued outside branches of the Bank of East Asia (BEA) across the city after rumours spread that the largely local bank was unstable.
“It has come to the notice of The Bank of East Asia … that malicious rumours have been circulated questioning the stability of the bank,” the bank said in a statement, adding that the rumours were first disseminated via electronic devices on Tuesday.
“The management of BEA hereby states in the strongest possible terms that such rumours have no basis in fact. The management further confirms that the bank’s financial position is sound and stable.”
The bank said that its total consolidated assets stood at 396.6bn HK dollars (50.8bn US dollars) as of June 30, with a capital adequacy ratio of 14.6 per cent, well above the international required level – often at around 8 per cent.
It also announced that its total outstanding exposures to Lehman Brothers and AIG were 422.8m HK dollars (54.2m US dollars) and 49.9m HK dollars (6.4m USdollars), respectively.
The bank said it had reported the matter to the police and the Monetary Authority.
Branches of the bank extended their office hours by half an hour on Wednesday afternoon, with Chairman David Li saying that the bank had enough cash to meet the demand of depositors and therefore no need to turn to the Authority for help.
The bank’s Deputy Chief Executive Joseph Pang said the bank would also allow customers to take out their fixed deposits.
Joseph Yam, chief executive of the Monetary Authority, said the bank had not requested any support, but the authority was ready to offer assistance at any time.
The depositors had nothing to worry about and should stay calm, Yam said.
The Hong Kong Monetary Authority said it has well-established mechanisms, such as the discount window and the lender-of-last- resort arrangement, to meet any requests for liquidity and stands ready to assist banks if they need liquidity support.
John Tsang, Financial Secretary of the Hong Kong Special Administrative Region (HKSAR) government, said authorities will assist the Bank of East Asia if necessary.
Although not immune to the recent financial tsunami, Hong Kong had strong fundamentals, sound regulatory framework and prudent risk management to ride out the storms, Tsang told the audience at a luncheon for the financial industry.
Anybody who disseminates malicious rumours to cause a panic among the public shall face criminal charges, he added.
Originally published by Xinhua news agency, Beijing, in English 0105 25 Sep 08.
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