External shocks prompt risk control call for Hong Kong banks

Banks should capitalise on emerging sector-led controls like the Commercial Data Interchange, says KPMG.

Hong Kong banks are called to implement stringent risk controls on commercial sectors vulnerable to trade tensions, interest rate movements, and geopolitical risks.

The banks’ credit quality outlook is likely to remain “nuanced” as they balance external macroeconomic pressures against a stabilising domestic environment, said KPMG.

The sector faces prominent headwinds from uncertainties surrounding global trade tensions, complex U.S. tariff risks, future U.S. interest rate movements and geopolitical risks particularly those tied to the Middle East, said KPMG China partners Benjamin Man and Samuel Luk.

However, these factors are unlikely to pose immediate concern to systemic stability, Man and Luk said in the Hong Kong Banking Report 2026.

“The Hong Kong banking sector continues to maintain strong capitalisation and solid liquidity positions, positioning it well to withstand near-term volatility and sustain resilience,” Man and Luk said.

Man and Luk said that Hong Kong banks must proactively implement stringent risk controls across vulnerable commercial sectors in order to navigate the risk landscape successfully and balance growth with stability.

“They should also capitalise on emerging sector-led initiatives, such as the Commercial Data Interchange pioneered by the Hong Kong Monetary Authority, to drive innovation and expansion,” Man and Luk said.

At the same time, banks should pursue strategic portfolio diversification, alongside disciplined capital management and agile pricing strategies, they said.

Banks should also consider evolving their offerings for family offices, as more Asian families opt to go that route, KPMG said.

For 2026, banks in the city are expected to benefit from the rising number of initial public offerings (IPOs), higher rates, and a stabilising housing market, according to an earlier report by Jefferies Equity Research.