Hong Kong’s largest local bank predicts a rate increase and has turned to cryptocurrencies; Also specifies operating rules for virtual assets.
The global market is closely monitoring this week’s meeting of the US Federal Reserve’s interest rate committee in anticipation of a potential interest rate increase.
Lin Yansheng, Director of Commercial Banking at Hang Seng Bank, the largest local bank in Hong Kong, discusses these expectations. He forecasts that interest rates will increase but adds that the rise will be transient.
Moreover, the bank recognizes the need for cryptocurrency in light of growing concerns. The bank has outlined the operational guidelines for virtual asset enterprises. Upon obtaining an Approval-in-Principle (AIP) license from the Securities and Exchange Commission, these businesses can establish standard bank accounts, per the bank’s announcement.
New Interest Rate Increases
Yansheng acknowledges that Hong Kong’s current high-interest rates, in contrast to those of the mainland and neighboring regions, have slowed global demand for bank loans. This year, he anticipates that loan growth will encounter pressure.
Nonetheless, he offers hope by asserting, “It will not wait long before reducing it.” He indicates that next year’s anticipated reductions in interest rates could boost loan growth.
According to the most recent data from the Hong Kong Monetary Authority, annualized loan growth has been negative since May and presently stands at -1.1%. Yansheng asserts that as mainland borrowing rates decline, Hong Kong’s financial industry will experience a reduction in loan growth. The high Hong Kong dollar interbank offered rate (HIBOR) currently inhibits corporate financing.
Despite the environment of elevated interest rates, Yansheng anticipates that the Fed will only raise rates once more and maintain this level for several months. In light of the decline in US inflation to 3% in June, he foresees a reduction in interest rates the following year.
Regarding trade financing, Yansheng notes that high-interest rates have led to trade financing management by neighboring regions, with some companies even relocating to Southeast Asia due to pressures on the mainland’s manufacturing industry.
Is It Time To Evaluate Digital Assets?
Concerning the expansion of virtual assets, the China Securities Regulatory Commission and the Hong Kong Monetary Authority have convened roundtable discussions to examine the challenges faced by virtual property businesses. Yansheng reaffirms Hang Seng’s commitment to complying with the regulator’s directives and accommodating these businesses.
To date, only OSL and Hashkey, two trading platforms for virtual assets, have obtained this authorization. Due to the difficulty of obtaining AIP certification, Hang Seng Bank says they have received a few inquiries regarding this topic. It implies that receiving such permission requires meeting stringent requirements, making it difficult for most businesses.
