Hong Kong’s capital markets regulator said Sunday that it doesn’t expect China’s new national security law to impact how financial institutions do business in the city, even as reports emerge that banks are increasing scrutiny of clients in response to the statute.
The Securities and Futures Commission, in a statement signed by CEO Ashley Alder, said “access to and free flow of” information is “a fundamental attribute” of Hong Kong as an international financial center, and that is not expected to change.
The regulator said “it is not aware of any aspect of the NSL (National Security Law) which would affect or alter the existing ways in which firms and listed companies originate, access, disseminate and transmit financial market and related business information.”
The commission said it intends to continue regulating Hong Kong’s markets as it did prior to the new law being enacted.
The new national security law broadly criminalizes secession, subversion of state power, terrorism and collusion with foreign entities in Hong Kong, carrying a penalty of up to life in prison. The Chinese government says the law is crucial to safeguarding Hong Kong’s economic development and political stability, but legal experts and critics say it curtails civil liberties and ends any remaining autonomy the region had.
Reuters reported late Sunday, however, that several global wealth managers are examining whether clients have ties to Hong Kong’s pro-democracy movement. The banks include Credit Suisse, HSBC, Julius Baer and UBS, among others that Reuters did not list.
The scrutiny includes going through comments made by clients and their associates in public and in media, as well as recent social media posts. Anyone with political and government ties is subject to additional diligence requirements, which can make it more difficult or impossible for them to access banking services depending on what the bank finds out.
The Securities and Futures Commission said stock and derivative markets in Hong Kong “have operated in an orderly manner” since the new law was enacted at the end of June, “and trading in the Hong Kong stock market has been very active.”
Hong Kong has long served as a link between Western democracies and China, with many global companies using the city as a base for their Asia operations. The new security law threatens to diminish Hong Kong’s role as a gateway for investment.
Banks such as HSBC and Standard Chartered have publicly supported the new security law, while Japan’s Nomura and Australia’s Macquarie are reportedly considering pulling back their Hong Kong operations.
Last week, U.S. President Donald Trump signed legislation that allows him to sanction banks, businesses and officials involved in helping China impose the new security law. Trump also signed an executive order that rescinded Hong Kong’s special trading status, which had facilitated trade between the city and the United States. China has vowed to retaliate over the measures.