UPDATE 3-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
(Adds further comments from politicians)

By Sumeet Chatterjee, Yanni Chow and Sinead Cruise

HONG KONG/LONDON, June 4 (Reuters) - Senior British and U.S.
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 more
than 1% in London, paring earlier gains in its Hong-Kong listed
stocks while Standard Chartered shares in London were flat.

"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, British Conservative Party
member and chair of the Foreign Affairs Committee tweeted.

Florida senator Rick Scott tweeted that HSBC had "chosen
profits over human rights."

Asked about the position taken by both banks, a spokesman
for British Prime Minister Boris Johnson said: "If China
proceeds with this security legislation, it would be in direct
conflict with its obligations under the Joint Declaration ...
our message is both clear and shared by our international
partners."

Asked specifically whether Britain was concerned by the
banks' actions, the spokesman said: "The answer I've given you
is a direct response to HSBC and Standard (Chartered)."

The United States, Australia and Canada have all criticised
China for imposing the law on the former British colony, which
was handed back to China in 1997 but guaranteed autonomy in a
Sino-British Joint Declaration.

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.

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."

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