UPDATE 1-Hong Kong banking regulator says business as usual, no fund outflows

(Adds Yuen quotes, context)

HONG KONG, Feb 4 (Reuters) - Hong Kong is not seeing fund outflows following Beijing’s imposition of a national security law in the Asian financial hub, a top executive at the city’s banking regulator said on Thursday.

Arthur Yuen, deputy chief executive of the Hong Kong Monetary Authority (HKMA), said it was “pretty much business as usual” for banks despite “the uncertainty”, and he had not heard complaints from customers about the “landscape becoming more complicated”.

Total deposits in Hong Kong rose 5.4% in 2020 compared to the previous year, the regulator said.

Beijing’s imposition of the law on the city last year, in response to sometimes violent protests in 2019, raised fears it would erode autonomy and freedoms in the former British colony.

Hong Kong is the regional home for a large number of global financial companies, some of whom have been caught up in the subsequent fallout.

In response to the security law, the U.S. government last year barred American companies and people from doing business with Hong Kong leader Carrie Lam and other Hong Kong and Chinese officials, and prevented non-U.S. financial institutions from offering services to Lam and others.

Banks followed the sanctions, and were criticised for doing so by some pro-Beijing Hong Kong politicians.

Yuen said on Thursday that while banks in Hong Kong had no legal obligation to follow U.S. sanctions, they must consider any risk factors in their dealing with customers. He said he would respect banks’ decisions.

Hong Kong police scrutinised the bank records of pro-democracy activists who were arrested under the security law, some activists and a senior bank executive told Reuters last month, and also ordered the freezing of former Hong Kong lawmaker Ted Hui’s account

As a result banks, notably the city’s largest HSBC, have come under fire from politicians in the United States and Britain.

Yuen said that account closures were not for political reasons.

“Hong Kong banks must comply with requests to help investigation by law enforcement agencies; banks have to comply with laws no matter whether in Hong Kong or London.” (Reporting by Alun John; Writing by Sumeet Chatterjee; Editing by Kim Coghill and Emelia Sithole-Matarise)