Have Credit Suisse and SVB Failures Driven Exodus of Capital Back to China?

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The recent failures of Credit Suisse and Silicon Valley Bank (SVB) may have created an exodus of capital to Hong Kong, as Chinese investors seek a safe haven in capital markets at home. The lifting of Covid-related movement restrictions is also creating a bonanza for local banks due to the return of mainland visitors.

State-owned media reports that Chinese nationals have withdrawn USD$76 billion of assets from the US along with a further $165 billion in assets from Switzerland, channelling most these sums eastwards to the Asian financial hubs of Singapore and Hong Kong.

According to reports, the intensity of the capital flows have forced Hong Kong banks to suspend vacations for staff, with branches of HSBC stepping up operations to open seven days a week.

One source from a bank in Hong Kong said that it had “returned to a peak period” due to the increase in the number of people coming to Hong Kong to open accounts and deposit funds as result of the SVB and Credit Suisse scandals. Three of HSBC’s branches are trialing special opening arrangements on Saturdays and Sundays to meet the increasing demand for services.

The Hong Kong Monetary Authority (HKMA) has refrained from denying reports that the financial hub has seen a sharp surge of deposits into local banks, stating in an email to that it “will respond in a timely manner” to inquiries on the matter.

Lifting of Covid restrictions makes hay for Hong Kong banks

The ongoing cancellation of Covid-related movement restrictions in Hong Kong is also a key contributing factor to increased customer activity at banks in the former colony.

According to data released by the Hong Kong Special Administrative Region Immigration Department, over 628,000 visitors from mainland China have visited Hong Kong during the period from January to February 2023, which is 75 times the figure for the same period in 2022.

HSBC said the number of overseas Hong Kong residents or non-local residents using HSBC branch services has significantly increased since Hong Kong fully lifted its entry prevention and control measures related to the COVID-19 pandemic in early February.

In February, the number of new non-local resident customers recorded by HSBC Hong Kong had recovered to the monthly average of the first half of 2019.

Peggy Pang, Head of Wealth Management and Personal Banking Distribution at HSBC Hong Kong, said that since the full removal of movement restrictions between Hong Kong and mainland China, the daily average number of non-local residents visiting the branch in February increased by more than double compared to the January average, mainly driven by mainland Chinese customers.

“The number of account opening inquiries received by the customer service center for has doubled from January, reflecting the market’s strong demand for banking services.”

To better meet customer needs, HSBC Bank has announced that three of its branches, including HSBC Shang Yu and Premier Center, HSBC Paterson Premier Center, and Kwun Tong Branch, will be the first to commence operation seven days a week starting from March 25th, providing services to customers by appointment on the weekends.

The three branches will extend their service hours on Saturdays to 5 p.m. and will be open from 2 p.m. to 5 p.m. on Sundays for non-cash transactions such as online or mobile wealth management and account opening which can be booked through the HSBC website.

“In addition to strengthening employee training, we will also increase the size of our international banking and insurance-related teams for mainland customers by 40% through timely deployment and recruitment,” Pang said.