Hong Kong banks' system liquidity to remain robust

The largest banks will benefit from strong domestic deposit bases.

According to Fitch Ratings, banks will continue to phase-in higher capital requirements, specifically the counter-cyclical buffer which applies to banks’ domestic exposure (1.25%); and a buffer for domestic systemic importance which applies to the five largest banks (0.5%- 1.25%). Recovery and resolution planning will be prioritised for the domestically systemically important banks.

"We expect system liquidity to remain robust as the largest banks benefit from strong domestic deposit bases. Sudden withdrawals from less stable foreign sources cannot be ruled out if sentiment towards China and the broader region were to change, but our base case is for the system to remain liquid," adds Fitch.