The Hong Kong Monetary Authority continues to defend the reputation of the city’s banking system is popularly believed to be battered by months of ongoing political unrest.
Total Hong Kong dollar deposits slipped just 0.1 percent in November, according to data released by the HKMA which used this as evidence of the banking system’s resilience. Total deposits fell slightly to around HK$6.91 trillion ($887 billion) in November. On a longer-term basis, Hong Kong dollar deposits rose by 3 percent during the first 10 months of 2019, while US dollar deposits rose 1.8 percent.
«Clearly this could not be a sign of funds flowing out of the Hong Kong dollar system,» said Howard Lee, HKMA’s deputy chief executive, in an article published by the central bank – the second of its type this month to assure the public against fears of fund outflows.
Strong Peg
In addition to deposits, the HKMA also highlighted the strength of the Hong Kong dollar and subsequent central bank actions as a key indicator of the banking system’s health. Should outflows occur, the Hong Kong dollar would naturally decline and which would require the HKMA to buy the currency in order not to break the weaker end of the HKD-USD peg ($1 = 7.85 Hong Kong dollars).
According to Lee, the HKMA not been called upon to buy Hong Kong dollars since April this year, keeping its aggregate balance stable at HK$54 billion ($6.9 billion) since then. In fact, the contrary has occurred with Hong Kong dollars having steadily strengthened in the past few months.
«The social situation in the past six months has no doubt impacted on the real economy,» Lee reiterated. «But the financial market has remained stable, thanks to the well-tested Linked Exchange Rate System, Hong Kong’s robust banking sector, and the massive buffer and resilience that we have built up in the financial and banking systems over the years. Of course, we will continue to closely monitor the markets and fund flow situations.»
