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Hong Kong Regulator Summons Banks as June Loan Growth Jumps

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Hong Kong Regulator Meets Banks After June Loan Growth Doubles
Signage for the Hong Kong Monetary Authority is displayed outside Two International Finance Centre in the business district of Central in Hong Kong. Photographer: Jerome Favre/Bloomberg

July 26 (Bloomberg) -- The Hong Kong Monetary Authority is summoning the city’s banks for meetings after a doubling in the pace of loan growth stoked concern that credit and funding risks have risen.

Bank loans expanded by an annualized rate of almost 40 percent in June, compared with 20 percent a month earlier, the regulator said in an e-mailed reply to questions. The HKMA has been talking with lenders to assess the risks and whether the pace will continue, the regulator said in the e-mail, declining to say when the meetings will be finished.

A cash crunch in China’s interbank lending market last month, the worst in at least a decade, has reduced the availability of funding. Money market rates on the mainland spiked last month, increasing Hong Kong’s relative attractiveness for borrowers.

“The growth of loans will come down to a more moderate level in the remaining five months this year,” Ronald Wan, a committee member at the Hong Kong Securities & Investment Institute, said by phone. “Credit liquidity in mainland China will restore to normal, making companies less willing to come to Hong Kong to borrow money.”

Hong Kong bank loans in June jumped by about 3 percent from May, the regulator said. That increased outstanding loans in the city by HK$177 billion ($22.8 billion), to HK$5.92 trillion, according to Bloomberg calculations based on HKMA loan data.

The surge in loans, equivalent to an annual rate of almost 40 percent, is the biggest in three years, Apple Daily reported earlier today. Bank lending grew 9.6 percent last year and 20 percent in 2011, according to the regulator’s latest annual report.

To contact the reporter on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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