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The controversial national security law in Hong Kong is reportedly being fast-tracked and could potentially come into effect this week. Here are the top five things to watch out for in banking.

1. Bank Sanctions

The U.S. Senate recently passed the «Hong Kong Autonomy Act» which it claims would target people or entities that have «materially contributed» to China’s failure to comply with the 1985 Sino-British Joint Declaration or the Basic Law, the city’s mini-constitution. The thorn in the flesh for the financial sector is the possibility of sanctions against banks that conduct significant transactions with such people or entities.

«The U.S. took advantage of the national security law and stirred up so-called sanctions, which drew the market’s attention on what effects this might lead to,» noted Hong Kong’s financial secretary Paul Chan in an official blog post, adding many in the financial sector agreed that new legislation could restore order.

Although the local government has said financial institutions have no related obligations to under Hong Kong law, there are undoubtedly risks for banks operating both in the city and Wall Street.

2. Capital Flows

There have been numerous government assurances about the free flow of capital in Hong Kong and no institution has publicly stated that it had observed any significant outflows. Still, reports of asset relocation risk persist ranging from insecure Chinese high net worth individuals to hedge funds worrying about operational disruptions.

If any floodgates were to be opened, Singapore is widely viewed as the primary beneficiary due to its close vicinity and cultural similarities. 

3. Talent Retention

Security legislation aside, ongoing social unrest had already reportedly created existing momentum for emigration to various locations including Australia, the U.K., Canada, Taiwan, Malaysia, Portugal and Austria. In addition to the U.K.’s potential border opening for nearly 3 million eligible British National Passport holders in Hong Kong, Japan has also welcomed the city's workers with a focus on skilled talent in sectors like finance.

Should the new environment be materially unfamiliar, expatriates could also opt to move.