{"id":184027,"date":"2023-11-25T08:39:13","date_gmt":"2023-11-25T08:39:13","guid":{"rendered":"https:\/\/precoinnews.com\/?p=184027"},"modified":"2023-11-25T08:39:13","modified_gmt":"2023-11-25T08:39:13","slug":"financial-contagion-warning-as-hsbc-is-told-to-brace-for-6-3bn-hit","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/business\/financial-contagion-warning-as-hsbc-is-told-to-brace-for-6-3bn-hit\/","title":{"rendered":"Financial contagion warning as HSBC is told to brace for \u00a36.3bn hit"},"content":{"rendered":"

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HSBC is facing a “hit” of more than \u00a36.3billion as a result of unsecured commercial property loans into China, a UK-based tax consultant has warned.<\/p>\n

Bob Lyddon branded the situation a \u2018disaster\u2019 – and warned of a “financial contagion” risk which could have a knock-on effect on Britain\u2019s economy.<\/p>\n

HSBC earlier this month confirmed it was setting aside \u00a3910million to cover expected loan losses, including \u00a3412million related to the commercial real estate sector in China – but Mr Lyddon said the actual picture was much worse.<\/p>\n

The founder of Lyddon Consulting Services outlined his concerns in an analysis specifically written for Express.co.uk – and has urged the bank not to underestimate the seriousness of the situation.<\/p>\n

He explained: “HSBC’s stake in its Chinese bank – Hang Seng – looks overvalued by \u00a33.3billion given the benchmark set by Standard Chartered.<\/p>\n

READ MORE: <\/strong> Everything we know so far as China in grips of new respiratory illness[INSIGHT] <\/strong><\/p>\n

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“Forty-two percent of HSBC’s commercial property loans into China are either sub-standard or credit-impaired: \u00a34.6billion out of \u00a311billion. That’s a disaster.<\/p>\n

“The equivalent figures just for Hong Kong are 63 percent, and \u00a33.8billion out of \u00a36billion. That’s a catastrophe.”<\/p>\n

Even worse, \u00a33billion of this \u00a33.8billion was not backed by real-estate security, Mr Lyddon stressed.<\/p>\n

He explained: “That’s an oxymoron: they should not be booked as real-estate lending if they are unsecured.<\/p>\n

HSBC to close more than 50 branches across the UK – full list<\/h3>\n

“Are these frauds, where a borrower has used the money meant to construct a building but the site remains vacant?<\/p>\n

“Or, if there is a building and the borrower has defaulted on the loan, are the bank’s mortgage papers defective so it cannot repossess? What is going on?”<\/p>\n

He added:”What was the bank thinking of to enter unsecured lending into its accounts as real-estate lending? What were the auditors thinking of when they signed the accounts off?<\/p>\n

“What about financial regulators who are supposed to check the adequacy of banks\u2019 capitalisation – do they allow HSBC to fund these loans with the lower level of capital appropriate to secured (ie real) real-estate lending? What are the guidelines of the Financial Reporting Council for a case like this?”<\/p>\n