In a strategic move, HSBC is set to enhance risk management measures at its Hong Kong unit, Hang Seng Bank, amid concerns of potential bad loans surge due to China’s economic challenges and the ongoing property sector crisis. The initiative involves closer involvement of Hang Seng’s top executives in Asia-Pacific risk management discussions, covering corporate, retail, wealth, and private banking.
While HSBC’s focus on Asia aligns with economic turmoil in China, the bank aims to share expertise and best practices in risk management operations with Hang Seng. This collaboration, still under discussion, is likely to be implemented this year to address the rising bad loans ratio, particularly in the mainland property sector.
HSBC’s commitment to a robust risk culture is emphasized in the initiative, aiming to achieve strategic goals, serve customers, and grow business safely. Hang Seng, 62% owned by HSBC, has experienced an increased non-performing loan ratio, driven by challenges in the gross loan balance and new bad loan downgrades.
The new approach involves regular participation of Hang Seng’s top executives in HSBC Asia Pacific’s risk management meetings, focusing on business-specific issues and market developments. The closer collaboration aims to promptly identify and mitigate risks, allowing informed risk-adjusted remuneration to foster a strong risk culture.
The initiative is expected to facilitate the sharing of information on regulatory and market developments in major Asian markets, ultimately benefiting both HSBC and Hang Seng. As economic challenges persist and regulatory changes unfold rapidly, this move is seen as a win-win for the two entities amidst the evolving financial landscape.
