The global financial health depends on the US housing market conditions and how central banks respond to a more challenging environment, said Joseph Yam, chief executive of Hong Kong Monetary Authority (HKMA).

In his column released yesterday on the HKMA's website, Yam said that there are signs that the adjustment of the US financial market may be more protracted than previously thought.

The falling house prices, rising mortgage delinquency rates, and an increasingly large overhang of unsold homes all indicate alarming messages.

"The important question for those concerned with financial stability is whether, during the course of this adjustment, the viability of individual financial institutions, or even the financial system, comes under stress," he said.

Yam added the credit crisis is not a serious concern for Hong Kong, since the exposure of local banks to subprime-related assets is small compared with their overall assets, and they remain well capitalized and have high levels of liquidity.

Major Hong Kong banks said yesterday they had kept their prime lending rates unchanged, following the US Federal Reserve's decision.

HSBC, Hang Seng Bank and BOC (Hong Kong) said it will freeze its prime lending rate at 5.25 percent.

The lenders' move was expected because Hong Kong pegs its currency to the US dollar and typically follows US rate adjustments lockstep.

Standard Chartered Bank (SCB) will keep its prime rate at 5.5 percent, the lender's top management said yesterday.

Listing in A-share

Benjamin Hung, chief executive for SCB's Hong Kong operation, said that the bank has adopted an "open" attitude toward floating shares in the yuan-denominated A-share market on Chinese mainland.

"Standard Chartered is always up for overseas fund raising opportunities. But at the moment, we don't have immediate plan to list shares in A share market," said Hung.

SCB's rival - HSBC and Hong Kong's local lender, Bank of East Asia - are reported to have considered a share sale in Shanghai. Analysts, however, say the A share market is not yet ready to receive overseas share issuers.

"A freely convertible yuan is the first prerequisite for overseas banks listing in Shanghai," said Tony Tong, an analyst at China Everbright Research. "The mainland financial market is not fully open to international banking practice."

He said the main purpose of overseas lenders' share sale on the mainland will enhance their market penetration rather than fundraising. They have many other options to enrich cash flows, Tong added.

(HK Edition 08/08/2008 page6)