China’s planned anti-sanctions law for Hong Kong unsettles financial sector

HONG KONG, Aug 19 (Reuters) – World banks and different monetary establishments in Hong Kong are scrambling to seek out out particulars of China’s deliberate imposition of an anti-sanctions regulation on town, and attempting to grasp the way it may affect their operations within the monetary hub.

Beijing adopted a regulation in June below which people or entities concerned in making or implementing discriminatory measures in opposition to Chinese language residents or entities may very well be placed on a authorities anti-sanctions listing.

Monetary corporations are carefully watching a meeting this week of the Nationwide Individuals’s Congress Standing Committee, the best organ of China’s parliament, for indicators on how and when comparable laws will likely be launched in Hong Kong.

Hong Kong chief Carrie Lam mentioned on Tuesday she didn’t have an specific timetable for its implementation. read more

The transfer got here because the U.S. authorities imposed a number of rounds of sanctions on Hong Kong and Chinese language officers over Beijing’s crackdown on town’s freedoms below sweeping nationwide safety laws. read more

Beneath the deliberate regulation, if monetary establishments in Hong Kong implement U.S. sanctions, they could be uncovered to authorized danger in Hong Kong for doing so, monetary sector executives and legal professionals mentioned.

“Many international multinational corporations are asking concerning the affect of the anti-foreign sanctions regulation, particularly worldwide banks and monetary establishments,” mentioned Shaun Wu, a Hong Kong-based associate at regulation agency Paul Hastings.

“It’s vital as a result of worldwide banks and monetary establishments could discover themselves caught between a rock and a tough place.”

Considerations have swirled over international monetary establishments’ prospects in certainly one of their most profitable markets since Beijing’s implementation of the safety regulation within the former British colony final yr.

The anti-sanctions regulation now raises the spectre of monetary corporations getting caught within the crossfire as sparring between the world’s two largest economies escalates.

Whereas high executives at Hong Kong’s greatest monetary corporations haven’t aired their considerations in public, folks conversant in the matter mentioned there had been intense discussions internally on methods to take care of it.

A senior government informed Reuters that Hong Kong Monetary Secretary Paul Chan had abruptly cancelled a gathering with enterprise teams scheduled for Thursday, with out offering a motive.

The manager, who declined to be recognized resulting from sensitivity of the matter, mentioned companies have been scrambling for data and Chan had made no effort to allay considerations regardless of repeated requests for conferences.

Places of work of the Hong Kong authorities and Chan didn’t instantly reply to Reuters request for remark.

Hong Kong is the regional hub for a lot of world monetary corporations, and accounts for the majority of the earnings for corporations resembling HSBC (HSBA.L) and Commonplace Chartered (STAN.L).

“A few of our monetary establishment shoppers are attempting to plan out totally different situations forward of the anti-foreign sanctions regulation, attempting to resolve what they’d do if somebody is sanctioned by the U.S. and subsequently run the danger of prosecution in Hong Kong for complying with such sanctions,” mentioned Rod Francis, head of FTI Consulting’s monetary crime follow.

“However whereas state of affairs planning is beneficial, there’s solely a lot of that sort of navel gazing you possibly can really do.”

LAW ENFORCEMENT

The U.S. final yr imposed sanctions preventing American companies and non-U.S. banks from doing enterprise with a number of Chinese language and Hong Kong officers whom it mentioned applied Beijing’s nationwide safety regulation on Hong Kong.

A separate U.S. ban on investments in corporations Washington considers linked to China’s navy forced U.S. banks in Hong Kong to chop publicity this yr to a number of Hong Kong-listed Chinese language telcos.

A lawyer at one worldwide regulation agency in Hong Kong mentioned they’d been inundated with calls relating to the anti-sanctions regulation however they have been in no place to offer recommendation, given the entire lack of readability.

“We’re ready like everybody to see what’s contained within the regulation … it is exhausting to guess what will likely be in there,” one U.S. financial institution government mentioned, additionally declining to be recognized.

Senior executives at two massive international banks in China informed Reuters they’d not acquired any specifics concerning the regulation even within the mainland and their efforts to hunt readability from regulators had not been profitable.

Some monetary and authorized professionals hoped Hong Kong would implement a watered-down model of the mainland regulation to ensure town is ready to preserve its finance hub standing.

Paul Hastings’ Wu mentioned lots would rely on who will implement the brand new guidelines and the way. “That company goes to find out, in follow, how vast the house between the rock and the exhausting place will likely be.”

Reporting by Alun John, Scott Murdoch, Anne Marie Roantree in Hong Kong and Engen Tham in Shanghai; Writing by Sumeet Chatterjee; Enhancing by Kim Coghill

Our Requirements: The Thomson Reuters Trust Principles.