UPDATE 2-HSBC, StanChart criticised for backing Hong Kong security law

* Hong Kong single largest market for HSBC, Standard
Chartered

* HSBC investment case clouded by the outlook for Hong Kong
-analyst

* Politicians, customers criticise bank
(Recasts with political reaction)

By Sumeet Chatterjee, Yanni Chow and Sinead Cruise

HONG KONG/LONDON, June 4 (Reuters) - Senior British
politicians criticised HSBC and Standard Chartered
on Thursday after the banks backed China's national
security law for Hong Kong, in conflict with the British
government's opposition to the proposed legislation.

In a break from their usual policy of political neutrality,
the British banks on Wednesday expressed support for the law
even as it drew global condemnation, including from Britain, and
revived anti-government demonstrations in the Asian financial
hub of Hong Kong.

Shares in HSBC, which is Britain's biggest bank, fell 1% in
London, paring earlier gains in its Hong-Kong listed stocks
while Standard Chartered rose slightly in London against a 1.2%
drop in the FTSE 350 banks index.

"I wonder why HSBC and StanChart are choosing to back an
authoritarian state's repression of liberties and undermining of
the rule of law," Tom Tugendhat, Conservative Party member and
chair of the Foreign Affairs Committee tweeted.

People who said they are HSBC customers posted on social
media that they will close their accounts in response to HSBC's
backing of Beijing.

HSBC and StanChart declined to comment.

The reaction highlighted the predicament facing the two
banks, based in Britain but with deep roots in China where they
are trying to expand when the country's ruling party is clashing
with Britain and the United States.

Hong Kong accounted for 90% of HSBC's pre-tax profit and 41%
of StanChart's in 2019, showing the importance of the Asian
financial hub to the banks' bottom line.

"The investment case for HSBC is clouded by the outlook for
Hong Kong and steps by China to impose greater control over the
autonomous region," said Will Howlett, equity analyst at HSBC
shareholder Quilter Cheviot.

The Global Times, which is published by the People's Daily,
the official newspaper of China's ruling Communist Party, said
that HSBC's move should have come earlier.

Some of HSBC's corporate peers including Cathay Pacific
Airways have faced retribution from Beijing for
perceived support for the anti-government protesters.

HSBC backing comes after former Hong Kong leader Leung
Chun-ying on Friday criticised the bank for not making its
"stance" clear on the law and said that its China business could
be "replaced overnight" by banks from China and other countries.

The United States, Australia and Canada have all criticised
China for imposing the law on the former British
colony.

Some employees of HSBC and StanChart noted that the business
imperative was likely the reason for the support.

"The reason for the statement is white terror, forced action
to protect the bank's business," Wong, an HSBC staffer in Hong
Kong who declined to give his full name, told Reuters.

"When (these) two banks started to take a stand, it will be
no surprise that other banks will start to follow suit."

A StanChart employee, Tony, who also declined to give his
full name, said: "The commercial sector of Hong Kong is
definitely influenced by the Chinese government as we need them
for our business."

But the Hong Kong Finance General Employee Union, formed in
September to bring together local financial professionals amid
pro-democracy protests, has criticised the move.

"HSBC and Standard Chartered should clarify if they are
betraying Hong Kong people while most of the governments from
the western world are against this evil law and supporting Hong
Kong people," union Chairman Ka-Wing Kwok said.

(Reporting by Sumeet Chatterjee and Yanni Chow in Hong Kong and
Sinead Cruise and Lawrence White in London, Editing by Himani
Sarkar and Jane Merriman)