In Hong Kong, we build a global business empire

Chapter 657 The lion opens its mouth

The right of banks to issue banknotes in Hong Kong is very special.

In Hong Kong, since the city's rise, the power to issue banknotes has always been held by British banks. This was done to meet the needs of British colonial trade and to maximize British profits, so it was impossible for it to be in the hands of anyone else.

For example, when Standard Chartered Bank obtained the qualification to issue banknotes in 1862, it mainly served Sino-British trade finance, an arrangement that reflected Hong Kong's colonial economic structure as a trade hub in the Far East.

In the more than 3-year colonial history of Hong Kong, only three banks actually had the right to issue banknotes: Huafeng Bank, Standard Chartered Bank, and Yuli Bank.

Standard Chartered Bank and Yuli Bank both obtained the qualification to issue Hong Kong dollar banknotes in 1862, 21 years after Hong Kong opened to foreign trade.

Huifeng Bank, a local bank, was only established in 1865, so it obtained the right to issue banknotes in 1865.

However, as a bank headquartered in Hong Kong, Hui Fung Bank quickly received the most support and gradually became the largest bank in Hong Kong.

In 1959, Yuli Bank was acquired by Huifeng Bank. Subsequently, due to its continued poor performance and decline, its right to issue banknotes was taken back by the Hong Kong government in 1974.

In other words, to this day, only two banks in Hong Kong have the right to issue banknotes.

The benefits of having the power to issue currency are numerous.

Take the cost of capital as an example. By issuing currency, the issuing bank can directly obtain interest-free or low-interest liabilities, which is cash in circulation.

This essentially opens up a low-cost channel for banks to obtain funds, greatly reducing operating costs.

From a credit perspective, the issuance of currency by issuing banks is not arbitrary, but must be backed by reserve assets (such as foreign exchange and gold), and the entire process is under the strict supervision of the central bank or monetary authorities.

This mechanism essentially links bank credit closely with national or regional credit.

Taking Hong Kong as an example, the issuing bank must use US dollar reserves to issue Hong Kong dollars, and its currency credit is directly equivalent to the stability of Hong Kong's linked exchange rate system.

As a result, the bank's international credit rating will naturally rise, and its status and influence in the international financial market will be significantly enhanced.

In addition, as the implementing body for currency issuance, the issuing bank needs to maintain close cooperation with the central bank or monetary authorities.

In this process, the issuing bank can obtain the "right to know" and "right to make suggestions" on policy formulation, gain insight into policy trends in advance, make plans for its own development, and even influence policy formulation to a certain extent, creating a more favorable environment for its own development.

It can be said that once a bank has the right to issue currency, it is like obtaining a golden key to unlock the door to success, bringing numerous benefits.

Banks like HSBC and Standard Chartered have always held a high market share and position in Hong Kong, and the right to issue banknotes has played a crucial role in this.

Under normal circumstances, it would be impossible for the Bank of East Asia to obtain the right to issue banknotes!

After all, the Bank of East Asia was not a British-owned bank and had little connection with the financial landscape of Hong Kong dominated by British capital.

For a long time, the right to issue banknotes in Hong Kong has been firmly controlled by British banks. This is an economic privilege system left over from British colonies, which aims to maintain Britain's colonial interests and trade advantages in Hong Kong.

As a representative of Chinese-owned banks, Bank of East Asia has already made its mark in Hong Kong's financial sector, but the difficulty of breaking this traditional pattern is self-evident.

However, if it can leverage Standard Chartered Bank's strong background and influence, Bank of East Asia may have a very high chance of obtaining the right to issue banknotes in Hong Kong.

Standard Chartered Bank is a leading financial institution in the UK, and the conglomerate behind it wields considerable influence in both the British political and business spheres.

If the consortium behind Standard Chartered Bank were willing to step in and mediate at the British government level, the issue of issuing banknotes for a bank in a colony like Hong Kong would not be a difficult matter at all.

Once things are settled smoothly on the British side, the Governor's Office in Hong Kong can finalize the matter with just one instruction.

After all, although the Governor's House had a certain degree of independence, it mainly acted according to the instructions of the British side. On major issues involving the core economic interests of the colony, such as the right of banks to issue currency, the Governor's House found it difficult to go against the wishes of the British government.

Lin Haoran nodded, fully supporting He Shanheng's suggestion.

Once the Bank of East Asia obtains the right to issue banknotes, the benefits for the Bank of East Asia will be numerous.

"Also, Haoran, there's something else I'd like to discuss with you. I hope you can take this opportunity to acquire Hengsheng Bank. Hengsheng Bank is the culmination of my life's work. Although I've resigned from my position at Hengsheng Bank, I've watched it grow step by step, and I have a very deep affection for it."

Moreover, Hang Seng Bank has always had a very good reputation in Hong Kong. Acquiring it would certainly not be a loss for Bank of East Asia; it would only make us stronger.

"I used to watch helplessly as it was gradually invaded by British capital and eventually acquired, and I always felt quite regretful. Now, Huifeng Bank's own situation is a bit delicate, which may be a good time for us to make a move!" He Shanheng once again sincerely offered his suggestion.

Lin Haoran smiled upon hearing He Shanheng's words.

How could this old man, so attached to Hengsheng Bank, let go so easily?

Therefore, Lin Haoran understood his suggestion.

Since that's the case, let's fulfill his wish. Besides, acquiring Hengsheng Bank does indeed have many potential benefits for East Asia Bank.

Lin Haoran nodded slightly, his eyes filled with determination and gentleness, and said, "Uncle He, I understand your intentions. Hengsheng Bank carries your hard work over the years. Now that Huifeng Bank is in a delicate situation, it is indeed a rare opportunity. Taking advantage of this opportunity to acquire Hengsheng Bank will not only strengthen the strength of East Asia Bank, but also fulfill your wish. I will naturally give my full support."

A hint of relief and gratitude flashed in He Shanheng's eyes.

If East Asia Bank successfully acquires Hang Seng Bank, it would mean that Hang Seng Bank would once again be under the leadership of He Shanheng, which would be a way of making up for a regret in his heart.

He Shanheng's lips curled up slightly: "Haoran, I'm relieved to hear you say that. Although Hengsheng Bank is not as large as Huifeng Bank and East Asia Bank today, it has unique advantages in financial services for small and medium-sized enterprises and local customer groups."

"As long as we integrate it properly after the acquisition, we will definitely achieve a synergistic effect greater than the sum of its parts. Hengsheng Bank is like my child; I know every inch of its structure. After the acquisition, I will definitely help East Asia Bank to perfectly integrate it and unleash its greater value."

"Uncle He, I believe in you!" Lin Haoran smiled, and his simple words were enough to make He Shanheng feel his complete trust.

“However, Standard Chartered Bank certainly won’t agree to all of our conditions, since they have their own considerations. But as long as we can grasp their most important interests, there will be room for negotiation.” He Shanheng frowned slightly and continued his analysis with a serious expression.

Lin Haoran nodded. The conditions they had come up with were already quite numerous, and each one was more outrageous than the last. Perhaps this tycoon from Standard Chartered Bank would be so angry that he would storm off on the spot!
Of course, everyone knows that negotiations are bound to be a protracted battle, requiring sufficient patience and strategy to secure the greatest possible benefit in this game.

Moreover, neither side was prepared this time, so it was just a preliminary test, and there will inevitably be more in-depth confrontations in the future.

No one would directly reveal their bottom line, and Lin Haoran and He Shanheng were well aware of this.

"The two issues of issuing banknotes and acquiring Hengsheng Bank must be our bottom line. We cannot back down even a step. As for other conditions, we will do what we can. If Standard Chartered Bank does not budge on these two issues, then there is no point in continuing the cooperation."

"I think they should carefully consider the interests involved. If they stubbornly refuse to budge, I'd rather let Huifeng Bank remain independent than give them the chance to acquire it!" Lin Haoran said with a slight smile.

When He Shanheng heard that Lin Haoran made the acquisition of Hengsheng Bank a necessary condition, he couldn't help but show Lin Haoran a grateful look.

He felt that if Hengsheng Bank could break away from Huifeng Bank and return to Chinese ownership, then his regrets over the years would be made up for.

After reaching an agreement, the two returned to Brown's class.

Lin Haoran spoke calmly first: "Mr. Brown, after some discussion, we do have some ideas about this cooperation. If Standard Chartered Bank can meet our conditions, we would not mind joining hands with your bank to promote your acquisition of Huifeng Bank."

Brown's eyes lit up, and he leaned forward slightly, saying eagerly, "Mr. Lin, please speak. As long as Standard Chartered Bank can do it, we will do our best to meet your conditions."

Lin Haoran smiled slightly, his expression calm and confident, and said methodically: "Firstly, in terms of overseas business expansion, we hope that Standard Chartered Bank can establish a strategic partnership with Bank of East Asia."

In developing business in high-potential emerging markets such as Africa, South Asia, and the Middle East, both parties will work together, support each other, share resources, and help Bank of East Asia achieve smooth international development.

Brown frowned slightly, gently stroking his chin with his fingers. After a moment of thought, he slowly said, "Mr. Lin, we can certainly consider this proposal. Standard Chartered Bank has cultivated the international market for many years and has indeed accumulated certain resources and channels. We have no major objections to resource sharing."

However, the competitive landscape in these emerging markets is complex, and specific details of cooperation, such as cooperation models, profit distribution, and risk-sharing, still need further in-depth discussion to ensure that the interests of both parties are fully protected. While Standard Chartered Bank has a certain strength and foundation in overseas markets such as South Asia, Southeast Asia, and Africa, the financial landscape in these regions is complex, and they are not in a dominant position; on the contrary, they face many strong competitors.

Therefore, the entry of Bank of East Asia into these markets will not cause any substantial damage to their interests. On the contrary, they may be able to leverage Bank of East Asia's strength to jointly develop the market and achieve mutual benefit and win-win results.

Lin Haoran nodded and continued, "Secondly, during the acquisition process, Standard Chartered Bank needs to provide Bank of East Asia with certain financial compensation. After all, Bank of East Asia has invested a lot of resources and energy to deal with the potential competition from Huifeng Bank."

Brown's expression was somewhat solemn. Although the specific amount of the compensation had not yet been announced, it was certainly not a small sum. However, he also understood that this opportunity to acquire Huifeng Bank was rare. If successful, Standard Chartered Bank's status in Hong Kong would be greatly enhanced.

He hesitated for a moment, then said, "Mr. Lin, I need to report the matter of financial compensation to headquarters, but I will do my best to try."

Lin Haoran's lips curled up into a confident smile: "Thirdly, and most importantly, Standard Chartered Bank needs to leverage its connections and influence in the political and business circles of the UK and Hong Kong to secure a currency-issuing right for Bank of East Asia."

Brown gasped when he heard the terms.

The right to issue banknotes has always been a core privilege of Hong Kong's financial sector, firmly controlled by British banks.

Although Standard Chartered Bank wields considerable influence in both British politics and business, securing the right to issue banknotes for Bank of East Asia is by no means an easy task.

He said with a wry smile, "Mr. Lin, this condition is too difficult. The right to issue currency involves the stability of Hong Kong's financial system and the balance of interests among all parties. The British government and the Hong Kong Monetary Authority may not agree to it easily."

Lin Haoran had anticipated Brown's reaction. He calmly said, "Mr. Brown, we understand the difficulty of this condition, but it is also one of the bottom lines of our cooperation."

If Standard Chartered Bank can't even secure the right to issue banknotes for us, then the significance of this cooperation for our Bank of East Asia will be greatly diminished. After all, you yourself are very clear about how much benefit you would gain if you successfully acquired Huifeng Bank, and our Bank of East Asia naturally wants to obtain sufficient benefits.”

Brown fell into deep thought. He understood the importance of this collaboration to Standard Chartered Bank, but the conditions proposed by Lin Haoran were indeed harsh.

After weighing the pros and cons for a long time, he finally spoke up: "Mr. Lin, I will report your conditions to headquarters truthfully. However, I hope your bank can also consider our position and give some flexibility and concessions in the cooperation."

Lin Haoran nodded: "That's natural. Cooperation is a process of mutual compromise and mutual achievement. As long as Standard Chartered Bank shows enough sincerity, our Bank of East Asia will also make corresponding adjustments."

Brown stood up and extended his hand to shake hands with Lin Haoran and He Shanheng respectively: "Mr. Lin, Mr. He, thank you for your frankness. I will communicate with headquarters as soon as possible and strive to give you a reply as soon as possible."

"Don't rush, I haven't finished yet!" Lin Haoran said with a smile.

Brown's expression turned somewhat unpleasant upon hearing this.

The first few conditions were enough for him to see that Lin Haoran was asking for an exorbitant amount, but he didn't expect that the other party would still not meet these conditions!

He suppressed his displeasure, forced a smile, and said, "Mr. Lin, please continue. I am all ears."

Lin Haoran spoke calmly and slowly: "Fourth, Huifeng Bank can be acquired by your Standard Chartered Bank, but we want Hengsheng Bank!"

Mr. Brown must also know that Heng Sheng Bank was founded by Mr. He Shanheng, but was acquired by Huifeng Bank through some shady means.

Now that Mr. He Shanheng wants to bring Hengsheng Bank back under his control, it's simply reclaiming what rightfully belongs to him. Logically and reasonably, it's not unreasonable, is it?

Brown frowned, inwardly groaning.

Hengsheng Bank is an important component of Huifeng Bank, and its market share is particularly important given Huifeng Bank's shrinking market share.

Lin Haoran's proposal to divest Hengsheng Bank to Bank of East Asia is undoubtedly a loss for Huifeng Bank and will significantly weaken Standard Chartered Bank's strength after its acquisition of Huifeng Bank.

Brown took a deep breath and tried to make his tone sound calm: "Mr. Lin, Hengsheng Bank occupies an important position in Huifeng Bank's business system. If it is divested, it will have a great impact on the integration and development after the acquisition. I'm afraid the headquarters will find it difficult to agree to this condition."

Lin Haoran had anticipated this. He smiled slightly and said slowly, "Mr. Brown, I fully understand the difficulties you are facing, but Hengsheng Bank is the culmination of Mr. He Shanheng's life's work, and its significance is beyond words."

For our Bank of East Asia, this is also a key step in strengthening our own capabilities and improving our business layout. Moreover, without the condition of Hengsheng Bank, our Bank of East Asia's motivation and enthusiasm in this cooperation would have been greatly reduced.

If our enthusiasm wanes and we lose the will to further our cooperation, I fear your bank's plan to acquire Huifeng Bank will be difficult to achieve smoothly.

Indeed, given Huifeng Bank's current situation, saving it would be as simple as Lin Haoran saying a word.

If he intends to allow HSBC to continue to exist independently, then no matter what tricks Standard Chartered Bank uses behind the scenes, trips up, or even stabs HSBC in the back, it will be impossible for them to successfully acquire HSBC.

Moreover, this move will only turn the potential cooperative relationship between Huifeng Bank and Standard Chartered Bank into irreconcilable enemies!

He Shanheng also spoke up from the side: "Mr. Brown, Hengsheng Bank is the culmination of my life's work. I have always been resentful that it was unfairly acquired by Huifeng Bank. Now that East Asia Bank and Standard Chartered Bank have the opportunity to cooperate, I hope to take this opportunity to get Hengsheng Bank back on track."

Brown frowned, pondered for a moment, and then said, "Mr. Lin, Mr. He, I will also report this condition to headquarters in detail, but I really cannot guarantee whether headquarters will accept it."

Moreover, even if headquarters agrees, the divestiture and handover of Hengsheng Bank during the acquisition process will involve numerous complex legal and financial issues that will require joint negotiation between both parties.

Lin Haoran nodded: "Mr. Brown, rest assured, as long as your bank is sincere in its cooperation, we can sit down and discuss these specific issues slowly."

Our Bank of East Asia has always upheld the principle of win-win cooperation, and we believe that as long as both sides are honest and open with each other, we can definitely find a solution that is acceptable to both parties.

Brown stood up and shook hands with Lin Haoran and He Shanheng again: "Mr. Lin, Mr. He, thank you for your honesty and patience. I will report all the conditions to headquarters as soon as possible and strive to give you a clear answer in the shortest possible time."

"Mr. Brown, would you like to stay for dinner before heading back? I've already told the kitchen to prepare it," Lin Haoran said with a smile.

"No, Mr. Lin, thank you for your hospitality, but I need to go back to headquarters immediately to report, so I won't stay any longer. I will definitely come to visit again as soon as I have definite news," Brown said politely, a hint of urgency in his eyes, clearly wanting to convey the situation here to London headquarters as soon as possible.

Lin Haoran didn't insist on keeping him, and nodded slightly: "Alright, Mr. Brown, I won't keep you any longer. I hope your bank will carefully consider our terms. I also believe that Standard Chartered Bank doesn't want to miss such a good opportunity to rise. I look forward to our cooperation in the future."

After shaking hands with Lin Haoran and He Shanheng again, Brown left in a hurry.

Watching Brown's departing figure, Lin Haoran frowned and said, "Uncle He, do you think Standard Chartered Bank will agree to our conditions? Especially the one with Hengsheng Bank, they seem to be in a difficult position."

Although Hang Seng Bank lost a significant portion of its market share during this period due to the expansion of Bank of East Asia, it still had over HK$10 billion in funds. Coupled with Hang Seng Bank's reputation and influence in Hong Kong, it was not something that could be easily given up.

Moreover, Standard Chartered Bank's acquisition of Huafeng Bank was aimed at expanding its presence in Hong Kong's financial market. Hang Seng Bank is undoubtedly a crucial piece of the puzzle in this grand scheme, so how could they easily give it up?

If Hang Seng Bank remains in the hands of HSBC, Standard Chartered Bank, after successfully acquiring HSBC, is highly likely to surpass Bank of East Asia in market share, thus achieving a comeback and becoming the leading financial institution in Hong Kong!

This is the fundamental reason why the other party is so concerned about losing Hengsheng Bank.

Giving up Hang Seng Bank means that Standard Chartered Bank is almost giving up its easy-to-have status as the top financial institution in Hong Kong.

He Shanheng narrowed his eyes slightly, his expression calm yet full of confidence: "Haoran, it's inevitable that they mind, but that also shows how important Hengsheng Bank is to our negotiations."

If Standard Chartered wants to successfully acquire HSBC, it must make concessions on this matter. While our proposed conditions are demanding, they are not without merit. If they want a mutually beneficial partnership, they must weigh the pros and cons.

Lin Haoran nodded, but still said, "That's true, but I'm still worried that the negotiations will reach a stalemate. If Standard Chartered Bank ultimately refuses, we'll have wasted such a good opportunity."

He Shanheng's lips curled up into a confident smile as he said, "Haoran, don't worry, they can't possibly refuse. They'll definitely agree in the end."

"Oh? Uncle He, why are you so confident?" Lin Haoran asked curiously.

"If they don't agree, it would be like missing a golden opportunity to acquire Huifeng Bank. As a result, their market share in Hong Kong will likely remain lukewarm, or even be further eroded under the pressure from our Bank of East Asia."

I think they're not so short-sighted as to not see the stakes involved. Besides, even if Standard Chartered Bank doesn't agree to our terms in the end, we still have a chance to reacquire Hengsheng Bank.

"Haoran, you know we still have plenty of tricks up our sleeves to increase our market share. When that time comes, both Huifeng Bank and Standard Chartered Bank will definitely see their market share shrink further. Huifeng Bank might even come knocking on our door, begging us to be lenient!" He Shanheng said, laughing heartily.

(End of this chapter)