Hong Kong’s banks can weather the storm

Early-warning indicators suggest that Hong Kong’s banking system is primed for a crisis. And banks face multiple shocks from an economic recession, a housing market correction and capital outflows. But conservative lending standards and strong capital buffers will help to limit the damage to their balance sheets. And if panic caused funding channels to dry up, banks should have enough liquid assets to pay off short-term liabilities until the HKMA got the situation under control.