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A portion of their client base will be made up of such vehicles and entities and they are faced with the thankless task of re-reviewing exposures manually, as they typically do not have the screening tools the larger banks employ. Many may ultimately decide that it is not worth it and that banking any type of individual connected to Hong Kong in an official capacity, past or present, is too risky.

They may sharply curtail services to them, their immediate families and other connected parties as a precaution – but this will be a very arduous and thorny undertaking that is also clearly not in the spirit of the national security law.

The Swiss private banks have another problem. It was only four years ago that the final penalty was paid by now defunct HSZH in the U.S. Justice Department’s tax evasion program that 80 Swiss banks ultimately participated in. In all of this, it is not easy to envision any of them wanting any kind of contact with the U.S. Treasury Department, particularly related to SDNs or OFAC sanctions.

The Big Always Survive

The larger private banks, with their amply staffed financial crime departments, are likely to be in a better position to cope with all this than the smaller banks. As the latter frequently do not have licenses to do business on the mainland, they are also unlikely to benefit from any of the recent steps instituted by China to further liberalize its financial markets to foreigners.

Despite the buoyant first half performance many private banks have reported in their consolidated figures, the immediate future remains murky for many of them in Hong Kong, particularly ahead of the Swiss vote in November on a law that would make companies liable for human rights abuses in connection with their activities abroad. If it is passed, it could not only force banks out of the city, but it could even force Hongkongers to abruptly end their love affair for Swiss watches, jewelry, chocolate - even Nespresso.