China links, property prices and market sentiment were underlined by the International Monetary Fund as the top risks for Hong Kong’s financial system.
The IMF reviewed the state of Hong Kong’s financial system in the latest report based on its ‘Financial Sector Assessment Program’ (FASP).
«The FSAP identified the extensive linkages to Mainland China, stretched real estate valuations, and exposure to shifts in global market and domestic risk sentiment, compounded by escalating U.S.‑China tensions, as the main macro financial risks,» the report said.
The last FASP for Hong Kong was conducted in 2014.
Resilient System
Overall, the IMF's assessment concluded that Hong Kong’s banking system remained broadly resilient to severe macro financial shocks.
Still, it noted pockets of vulnerability in foreign bank branches, investment funds, households, and non-financial corporates.
HKMA Independence
The report also noted that directors of IMF’s executive board supported providing «de jure operational independence to the Hong Kong Monetary Authority».
«Directors generally underscored the importance of continuing to strengthen regulation and preserving the rule of law to maintain a solid foundation for competitiveness as an international financial center,» it said.
The FASP was established in 1999 and it is mandatory for the 47 jurisdictions with systemically important financial sectors.
