Standard Chartered share price: BoE to unveil tougher stress tests for Asia-focused banks

Standard Chartered Plc (LON:STAN) and HSBC Holdings Plc (LON:HSBA)are poised to become the main targets of tougher stress tests to be unveiled by the Bank of England today. The new tests are expected to focus on international risks, particularly in Asia, which is a key region for the two lenders.

During last year’s tests, which largely focused on UK-centric risks, BoE governor Mark Carney hinted at what the emphasis for 2015 would be. “We can expect that we will look towards some of those global risks much more closely; they will figure more prominently in the stress,” he said. “And given the footprint of some of our largest banks in Asia … and given the risk profile in Asia … you can expect that would be a component of it.”
Asian exposures amount to $500 billion of risk-weighted assets at HSBC, or 40 percent of the bank’s total. Last year, the lender generated about 78 percent of its pre-tax profits in Asia, which suggests that any problems in the region would probably have a significant impact on the company.
At Standard Chartered, the focus on Asia is even stronger. Of $289 billion of outstanding customer loans and advances, $207 billion is with Asian clients. These include $87.5 billion classified as Greater China. Nearly a third of the bank’s operating income comes from China, compared with just over 11 percent coming from the developed markets of Europe and the US.
Depending on the results of the tests, lenders could be ordered to raise new capital in order to ensure that they have adequate protection against a financial crisis. In the cases of StanChart and HSBC, such demands could prompt more calls from investors for the banks to move their headquarters away from the UK.
In today’s trading, Standard Chartered shares were up 0.7 percent at 1,110.50p, as of 08:28 BST. The stock has risen 15.3 percent since the start of the year. The company’s market capitalisation currently stands at £27.4 billion.
As of the same time HSBC’s share price rose 0.5 percent to 581.30p, trimming its year-to-date decline to 4.5 percent. Europe’s largest bank is currently valued at £111.5 billion.
As of 10:32 BST, Monday, 30 March, Standard Chartered PLC share price is 1,110.25p.