Finance falters in market fall
Moody's Investors Service downgraded the outlook for Hong Kong's banking system from stable to negative in its June report, citing concerns at persistent negative real interest rates and banks' growing mainland exposure. Sonny Hsu, vice-president and senior analyst at Moody's, said banks raised their mainland exposure to 16.5 per cent of consolidated total assets at the end of 2012.
KPMG, meanwhile, stressed in its Hong Kong Banking Survey 2012 that while economic conditions in Hong Kong were generally favourable in 2011, it was evident that banks were operating in a challenging environment. With GDP growth slowing in the first half of 2012, coupled with an increasingly uncertain investment market, activity in the banking sector has slowed. This has no doubt had a knock-on effect on hiring in the sector and could pose a threat to workers in strongly affected areas.
KPMG's survey also pointed out that in order to meet Basel III, a global regulatory standard on bank capital adequacy, it was likely that most local banks will cut lending to boost capital.
Paul McSheaffery, a partner at KPMG China, said that foreign banks who face difficulties mobilising capital in their own countries tend to re-assess their Hong Kong activities. This could lead to further business restructuring, which will affect the local jobs market.