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HSBC and Standard Chartered fear new Trump China sanctions could freeze them out of dollar

Lucy Burton
·3 mins read
HSBC offices in Canary Wharf, London - AFP
HSBC offices in Canary Wharf, London - AFP

HSBC and Standard Chartered are bracing for a renewed US sanctions assault on China, amid official concern that escalating diplomatic tensions threaten collateral damage in the City.

They are working on contingency plans for a worst-case scenario in which the political and trade disputes between Washington and Beijing trigger restrictions on banks serving Chinese companies and individuals, known as secondary sanctions.

Sources close to the discussions told The Sunday Telegraph that HSBC and Standard Chartered were exploring how they might cope with potentially extreme measures from Donald Trump, including being effectively cut off from the US financial system. Specialist lawyers and regulatory experts said the banks needed to consider how they could operate without using the dollar.

Executives and City authorities are said to believe there is a small chance of such a development. Any threat to the stability of HSBC, Europe’s largest bank, is taken seriously, however, as the US faces an unpredictable presidential election campaign.

The Trump administration introduced sanctions on 11 Chinese officials last month for “restricting the freedom of expression or assembly of the citizens of Hong Kong”, following the introduction of a controversial security law in the former British colony.

HSBC and Standard Chartered executives publicly backed Beijing over the new restrictions.

Mike Pompeo, US secretary of state, then launched a public attack on HSBC, accusing the bank of supporting the sanctioned leaders. He claimed Chinese officials had bullied it into “shutting accounts for those seeking freedom”. Watch his latest comments on China, made during a press conference with Foreign Secretary Dominic Raab earlier this week, in the video below. 

The banks’ contingency plans have emerged as popular Chinese app TikTok is banned from US app stores. On Friday, the US government accused TikTok and the messaging app WeChat of being “active participants in China’s civil-military fusion”.

Mark Tucker, HSBC chairman, and Noel Quinn, chief executive, have avoided public comments on the deepening crisis, but Standard Chartered chief executive Bill Winters last week admitted that the rising tensions were “troubling” and a “tremendous preoccupation for us”.

He added: “Hong Kong as a global financial centre feels very, very safe to me. Now, could that change with escalating tensions or sanctions? Yes, of course it could. But Standard Chartered is prepared for that.”

HSBC and Standard Chartered declined to comment this weekend.

Banks that have acted as a financial bridge between East and West are now caught threatened on both sides.

Mr Tucker has privately warned the UK Government about the pressure HSBC faces in China, which accounts for most of its revenues and profits.

He suggested the ban on Huawei 5G mobile equipment in the UK could prompt reprisals.

Some money managers intend to make their own preparations for US action against China.

Mark Sheppard, who runs Manchester & London Capital Management, said his firm had sold its New York-listed shares in Alibaba in favour of Hong Kong-traded stock “because there’s been a lot of talk about enforced de-listing of Chinese shares in the USA” and concerns investments could be trapped.