Hong Kong’s Use of Emergency Law for Mask Ban Prompts Panic, Widespread ATM Withdrawals

October 11, 2019 Updated: October 12, 2019

Local media recently reported that Hong Kong’s central banking institution has begun monitoring capital flows. 

Worried this could signal that the government would soon limit bank withdrawals, many Hongkongers have begun lining up in front of ATM machines to pick up cash.

Such fears first arose after Hong Kong government leader Carrie Lam on Oct. 5 invoked a colonial-era emergency law to ban people from wearing masks during public gatherings, in an effort to quell ongoing protests against Beijing’s encroachment on Hong Kong’s autonomy. Many feared that the emergency law could be expanded to further clamp down on civil liberties, including access to their assets.

The Emergency Regulations Ordinance grants the chief executive broad powers to enact regulations, bypassing the city’s legislature to make arrests, stop communications, and issue punishment during occasions of emergency or public danger.

Real-Time Monitoring

In an Oct. 8 report, local newspaper Apple Daily, citing anonymous sources who work at a Hong Kong bank, said that the Hong Kong Monetary Authority (HKMA)’s bank regulatory division has increased its monitoring of capital flows, requiring all of the city’s banks to report unusual activity in real time, such as customers who withdraw large amounts of cash from the ATMs or counters of a local branch, or those who transfer large amounts out of their accounts.

The HKMA typically investigate capital flows once a year and ask all banks to report such activities on time.

Apple Daily reported that HKMA Banking Supervision has investigated all banks recently about the impact of ongoing protests on “capital flows,” as well as the total capital that banks currently have.

The report concluded that the increased monitoring “shows that Hong Kong authorities have entered into alert mode toward current financial risks.”

HKMA published the latest figures for Hong Kong’s foreign currency reserve assets on Oct. 8, with a total of $438.7 billion at the end of September. The number is slightly higher than August’s, at $432.8 billion, but lower than the figure from July, $448.5 billion.

Meanwhile, Goldman Sachs analysts Gurpreet Singh Sahi and Yingqiang Guo estimated that amid ongoing unrest due to the protests, $3 billion to $4 billion capital have exited Hong Kong in favor of Singapore this past summer, in their report released on Sept. 30.

Citing the Singapore Monetary Authority, Reuters reported that foreign-currency deposits by non-bank customers rose 52 percent to a record 12.8 billion Singapore dollars ($1.63 billion) in August, compared with 8.4 billion Singapore dollars in August 2018. Singapore’s banks also saw a sharp uptick in foreign currency deposits in July and August.

Long Queues to Withdraw Cash

Since Oct. 5, concerns about the possibility of future citywide regulations led many Hongkongers to line up in front of ATM machines to withdraw cash. 

HKMA published a statement the following day to address the rumors: “The HKMA noticed rumours about HKMA implementing a new regulation to cap the daily amount of cash withdrawal from banks. The message is totally fake and unfounded.”

According to the HKMA spokesperson, Hong Kong has about 3,300 ATMs. About 10 percent could not be used, due to protesters who have damaged ATMs that are Chinese state-owned or mainland-Chinese-operated, or those ATMs inside subway stations and shopping malls that were closed down.

Of the ATMs that are in service, 5 percent were out of cash due to too many people withdrawing cash, according to the spokesperson. 

Concerns About Capital Flight

Hong Kong commentator Kwai To published an Oct. 7 commentary on Apple Daily analyzing the public anxiety about the safety of their assets: “When people don’t trust the government anymore, and the Emergency Law gives unlimited power to the government, people will believe that the government will take even worse actions.”

Kwai continued: “Now Hong Kong’s status as a financial hub, and the free entry and exit of capital, have become uncertain. Nobody can guarantee that the Hong Kong government won’t use the Emergency Law to restrict the entry and exit of capital.”