HSBC Grapples With Controversy in Hong Kong

Data : 03/01/2020 @ 18:06
Fonte : Dow Jones News
Titolo : Hsbc Holdings Plc (HSBA)
Quotazione : 562.2  2.5 (0.45%) @ 17:35
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HSBC Grapples With Controversy in Hong Kong

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By Jing Yang 

HSBC Holdings PLC has suffered a backlash over an account closure in Hong Kong, with protesters vandalizing branches and cash machines, making it the latest multinational affected by social unrest and deepening political divides in the city.

For HSBC the stakes are high. While now based in London, HSBC has deep ties with mainland China, and Hong Kong, an exceptionally profitable banking center, is its largest market by both revenue and profit.

For years the bank has positioned itself to take advantage of China's growing economic ties with the wider world, but that integration is now imperiled by the trade conflict with the U.S. The lender is also battling to lift returns and turn around operations in the U.K., Europe and the U.S., and parted company with its previous chief executive in August.

Hong Kong protesters' anger was triggered by last month's arrests of four members of Spark Alliance, a nonprofit organization that had financed protest-related causes, such as legal and medical bills, with donations made by citizens to an HSBC account. Police also froze about HK$70 million (US$9 million) tied to the account.

HSBC had closed the account roughly a month earlier. The bank said the closure was for regulatory and compliance reasons, since the account wasn't being used for its stated purpose, and the shutdown was "categorically unrelated to the current Hong Kong situation."

Protesters have damaged some HSBC branches and cash machines during recent demonstrations. On New Year's Day, they smashed glass walls and automatic-teller machines in several HSBC outlets. Outside its Hong Kong headquarters, they attacked an iconic pair of bronze lions, spray-painting them red and setting them alight.

HSBC has been boarding up several outlets, including in the city's bustling districts of Central and Wan Chai. Elsewhere, two damaged branches have been closed. HSBC said services will also be suspended at over a dozen ATM machines and express banking centers in protest-hit districts on weekend nights and public holidays.

Some protesters have already targeted other businesses they see as taking Beijing's side, including Chinese state-owned banks such as Bank of China's Hong Kong arm and Starbucks.

At the same time, foreign businesses that get on the wrong side of Beijing risk being shut out of China's huge domestic market. HSBC has drawn public ire in mainland China over the past year for giving information to U.S. prosecutors about its client Huawei Technologies Co.

In September, Chairman Mark Tucker said on Chinese state television that the bank condemned violence in Hong Kong and supported "One Country, Two Systems," the formula under which Beijing governs Hong Kong.

Cathay Pacific Airways Ltd., the city's de facto flagship carrier, came under fire from Beijing over employee participation in protests, and later parted company with both its chief executive and its chairman.

"For the international business community, there's increasing pressure from the mainland in the way they do business in Hong Kong. Cathay Pacific is a big example," said David Webb, a Hong Kong-based investor and corporate-governance advocate.

The targeting of HSBC has divided opinion among the broader antigovernment movement. The bank's Facebook page has been inundated with angry and sarcastic comments, some attacking it for colluding with the Chinese Communist Party, although a few posts were more sympathetic toward the bank.

As the largest retail bank in Hong Kong, HSBC is seen by many locals as part of the community, and the vandalism has been controversial among protesters, said Gary Tang, an assistant professor of social sciences at The Hang Seng University of Hong Kong. "For protesters, it's more difficult to feel angry with HSBC. It represents something in the Hong Kong community."

Malcolm McNeil, a partner who specializes in China at law firm Arent Fox, said despite the bank's statement that it ceased doing business with Spark for regulatory and compliance reasons, "the real, deep question is whether HSBC shut down the account voluntarily or out of pressure from authorities."

Mr. McNeil added: "HSBC needs to do a better job explaining their action, or risk permanent public relations damage."

Police said the Spark account showed some hallmarks of money laundering, and said a large sum had been used to buy personal insurance products that benefited the sole director of the shell company that registered the account. Spark Alliance denied the claims and said it was being smeared.

Mr. McNeil said the police description didn't match the typical definition of money laundering -- or taking illicit funds and washing them through legitimate businesses.

--Margot Patrick and Natasha Khan contributed to this article.

Write to Jing Yang at Jing.Yang@wsj.com

 

(END) Dow Jones Newswires

January 03, 2020 11:51 ET (16:51 GMT)

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