Billions Injected Into Hong Kong Banking System

by Mary Swire, Tax-News.com, Hong Kong

25 September 2008

Hong Kong's Monetary Authority has injected USD3.9bn into the banking system to halt the hike in interbank interest rates, its chief executive Joseph Yam announced on Thursday.

Speaking to reporters on Thursday morning, Mr Yam said the surge was triggered by the massive deposit withdrawals at the Bank of East Asia.

To provide more capital to the banking system, the authority bought US dollars against HK dollars and the aggregate balance is projected, as a result, to rise to over USD10bn on September 29, 2008.

Noting the situation has stabilised Mr Yam said the authority will monitor the market closely and if necessary inject liquidity into it.

"The situation of the international market is difficult and Hong Kong will inevitably be affected. However, depositors and investors should maintain their confidence because our banking system is healthy," Mr Yam explained, adding:

"The authority will keep a close watch on international markets and offer advice to investors and depositors to manage risk."

Commenting on the bank run rumours, Chief Executive Donald Tsang said there is nothing to worry about because the Government has a clear picture of the latest development of Hong Kong's financial market and banking system.

Reiterating that the Bank of East Asia is financially stable and has sufficient capital, Financial Secretary John Tsang said the Government will render full support to the bank when necessary. He also said the Government is consulting the trade on the suggestion of increasing the coverage limit of the Deposit Protection Scheme.

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