Page last updated at 12:31 GMT, Wednesday, 24 September 2008 13:31 UK

Withdrawals hit Bank of East Asia

Customers queue outside the Bank of East Asia to withdraw their savings

The Bank of East Asia has denied rumours that it is in financial trouble, after thousands of customers queued to withdraw their savings.

After weeks of global market turmoil, lines of people quickly formed outside the bank's branches in Hong Kong.

In a statement, the bank said the rumours were malicious and untruthful, and they had informed the police.

The speculation was believed to have been spread by mobile phone, and drove the bank's share price down by 11%.

The rumours started earlier this week and customers descended on branches on Wednesday, despite bank staff handing out leaflets to the crowds denying that the bank was in financial difficulty.

'Sound and stable'

"The management of Bank of East Asia hereby states in the strongest possible terms that such rumours have no basis in fact" said the statement.

Traders and brokers, analysts and financial journalists, talk a lot - often with each other, even when they are not supposed to.

"The management further confirms that the bank's financial position is sound and stable," it added.

It also said that its total outstanding exposure to US bankrupt bank Lehman Brothers was HK$422.8m (29m), and to US insurer AIG was HK$49.9m (3.5m).

On Friday, Moody's Investors Service changed its outlook on the Hong Kong bank's credit rating from stable to negative, citing a recent insider trading case that exposed "lacklustre internal controls" at the bank.

Last week, the bank revealed a trading loss of HK$93m (6.5m) that it says was incurred by a rogue equity derivatives trader who "manipulated" valuations to hide losses.

The discovery forced the bank to revise down its earnings for the first half of the year.

The Hong Kong Monetary Authority also dismissed the speculation and said the banking system as a whole was "safe and sound."

"I can confirm, categorically, that these rumours are unfounded," said Joseph Yam, the authority's chief executive.

"It is a very sound bank", he added.


SEE ALSO
Congress cool after bail-out plea
24 Sep 08 |  Business
Shares surge on US bail-out plan
19 Sep 08 |  Business
The origins of financial rumour
19 Sep 08 |  Business
East Asia's 2008 growth 'to slow'
01 Apr 08 |  Business

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