HSBC Grapples With Controversy in Hong Kong
January 03 2020 - 12:06PM
Dow Jones News
By Jing Yang
HSBC Holdings PLC has suffered a backlash over an account
closure in Hong Kong, with protesters vandalizing branches and cash
machines, making it the latest multinational affected by social
unrest and deepening political divides in the city.
For HSBC the stakes are high. While now based in London, HSBC
has deep ties with mainland China, and Hong Kong, an exceptionally
profitable banking center, is its largest market by both revenue
and profit.
For years the bank has positioned itself to take advantage of
China's growing economic ties with the wider world, but that
integration is now imperiled by the trade conflict with the U.S.
The lender is also battling to lift returns and turn around
operations in the U.K., Europe and the U.S., and parted company
with its previous chief executive in August.
Hong Kong protesters' anger was triggered by last month's
arrests of four members of Spark Alliance, a nonprofit organization
that had financed protest-related causes, such as legal and medical
bills, with donations made by citizens to an HSBC account. Police
also froze about HK$70 million (US$9 million) tied to the
account.
HSBC had closed the account roughly a month earlier. The bank
said the closure was for regulatory and compliance reasons, since
the account wasn't being used for its stated purpose, and the
shutdown was "categorically unrelated to the current Hong Kong
situation."
Protesters have damaged some HSBC branches and cash machines
during recent demonstrations. On New Year's Day, they smashed glass
walls and automatic-teller machines in several HSBC outlets.
Outside its Hong Kong headquarters, they attacked an iconic pair of
bronze lions, spray-painting them red and setting them alight.
HSBC has been boarding up several outlets, including in the
city's bustling districts of Central and Wan Chai. Elsewhere, two
damaged branches have been closed. HSBC said services will also be
suspended at over a dozen ATM machines and express banking centers
in protest-hit districts on weekend nights and public holidays.
Some protesters have already targeted other businesses they see
as taking Beijing's side, including Chinese state-owned banks such
as Bank of China's Hong Kong arm and Starbucks.
At the same time, foreign businesses that get on the wrong side
of Beijing risk being shut out of China's huge domestic market.
HSBC has drawn public ire in mainland China over the past year for
giving information to U.S. prosecutors about its client Huawei
Technologies Co.
In September, Chairman Mark Tucker said on Chinese state
television that the bank condemned violence in Hong Kong and
supported "One Country, Two Systems," the formula under which
Beijing governs Hong Kong.
Cathay Pacific Airways Ltd., the city's de facto flagship
carrier, came under fire from Beijing over employee participation
in protests, and later parted company with both its chief executive
and its chairman.
"For the international business community, there's increasing
pressure from the mainland in the way they do business in Hong
Kong. Cathay Pacific is a big example," said David Webb, a Hong
Kong-based investor and corporate-governance advocate.
The targeting of HSBC has divided opinion among the broader
antigovernment movement. The bank's Facebook page has been
inundated with angry and sarcastic comments, some attacking it for
colluding with the Chinese Communist Party, although a few posts
were more sympathetic toward the bank.
As the largest retail bank in Hong Kong, HSBC is seen by many
locals as part of the community, and the vandalism has been
controversial among protesters, said Gary Tang, an assistant
professor of social sciences at The Hang Seng University of Hong
Kong. "For protesters, it's more difficult to feel angry with HSBC.
It represents something in the Hong Kong community."
Malcolm McNeil, a partner who specializes in China at law firm
Arent Fox, said despite the bank's statement that it ceased doing
business with Spark for regulatory and compliance reasons, "the
real, deep question is whether HSBC shut down the account
voluntarily or out of pressure from authorities."
Mr. McNeil added: "HSBC needs to do a better job explaining
their action, or risk permanent public relations damage."
Police said the Spark account showed some hallmarks of money
laundering, and said a large sum had been used to buy personal
insurance products that benefited the sole director of the shell
company that registered the account. Spark Alliance denied the
claims and said it was being smeared.
Mr. McNeil said the police description didn't match the typical
definition of money laundering -- or taking illicit funds and
washing them through legitimate businesses.
--Margot Patrick and Natasha Khan contributed to this
article.
Write to Jing Yang at Jing.Yang@wsj.com
(END) Dow Jones Newswires
January 03, 2020 11:51 ET (16:51 GMT)
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