Hong Kong regulator says no grounds to pursue action against HSBC for scrapping dividend
- Although it does not usually comment on individual cases, commission issued a statement due to ‘significant public interest’
- Hong Kong retail investors own about a third of the bank’s total shares, and lost US$1.28 billion from the dividend cancellation
Hong Kong’s securities regulator has said it will not take action on HSBC’s decision to scrap its dividend payment this year, after protests by the bank’s shareholders.
“There is at present no grounds on which regulatory action should be pursued … in respect of the cancellation and the suspension,” the Securities and Futures Commission (SFC) said in a statement on Friday.
The commission said it “has received a large number of enquiries and complaints from the investing public and professional bodies in Hong Kong”, and, although it does not usually comment on individual cases, was issuing the statement due to “significant public interest”.
Hong Kong retail investors own about a third of the bank’s total shares, and lost US$1.28 billion from the dividend cancellation. Many rely on the shares as a form of regular income.
The SFC said it had raised the shareholders’ concerns with HSBC and the Prudential Regulation Authority (PRA), an arm of the Bank of England that requested the dividend suspension. The PRA’s request, it said, was made in consideration of factors such as the economic implications of the novel coronavirus, and the need for early action to help boost firms’ capital positions. Any refusal of the request would not have best served HSBC or its shareholders, it added.
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An HSBC spokesman said the bank was aware of the SFC’s statement. “The board will review our dividend policy at, or ahead of the year-end results for 2020, when the economic impact of the pandemic is better understood,” he said.
On March 31, HSBC suspended dividends and share buy-backs for the first time in nearly 75 years, at the request of the PRA. The British regulator stepped in to pressurise five UK-based lenders to withhold payouts because of the coronavirus pandemic, which has damaged economies globally. Its aim was to bolster banks’ capital buffers and protect them against any economic fallout.
The dividend cancellation has again highlighted HSBC’s complicated situation, of being listed in both Hong Kong and London, and headquartered in the latter, and reignited the debate over whether it should relocate its headquarters to Asia, where most of its revenue is earned.
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Since April, there has been a string of protests by shareholders, who have threatened to take legal action against the bank and urged the SFC to intercede on their behalf with the Bank of England.
In mid-April, Christine Fong Kwok-shan, a district councillor, took a letter representing more than 500 HSBC investors to the SFC’s headquarters, and demanded that it fight to safeguard the interests of local investors.
Fong said the group would support demands for the bank to revoke its decision, or to pay the dividend in the form of shares rather than cash.
