HK banks hoard record piles of cash as economy sputters

Concerned that SMEs are struggling to get funding, regulators are monitoring situation

Hong Kong banks are hoarding cash and liquidity despite calls by the government to help out struggling small businesses with funding to reignite the city's ailing economy.

Banks in the city, including HSBC Holdings and Standard Chartered, held an aggregate liquidity coverage ratio (LCR) of more than 180 per cent in the second quarter, the highest ever and almost double the 100 per cent requirement.

The ratio - which gauges liquid assets held to meet short-term obligations - eased slightly to 178.4 per cent in September, according to the latest data from the Hong Kong Monetary Authority (HKMA).

The cash hoard has raised concerns with regulators, as the economy struggles to regain traction after the Covid-19 pandemic years and political upheaval.

The government, along with local banks, in August set up a task force to unleash small business funding and said it would "monitor" the business strategies of lenders. On their end, banks say the cash positions are prudent given the sluggish economy and property downturn and that demand for loans is subdued after years of rising interest rates.

Hong Kong's currency is pegged to the US dollar, and its monetary policy follows the US central bank, which until 2024 had been raising rates.