Law could make banks focus on deposits-HSBC

BEIRUT (Reuters) - Legislation could be introduced to ensure banks focus on their deposits as a prerequisite for lending, HSBC Group Chief Executive Michael Geoghegan said on Monday.

Geoghegan, speaking in Beirut after talks with the Lebanese central bank governor, also said "the reality is that Basel 2 without a liquidity strategy doesn't work."

HSBC, Europe's biggest bank, is one of the few major banks that has not needed to take taxpayer funds or raise cash privately.

"Every single month in every single country around the world we look at our asset and liability ratio and we always take deposits first and then we lend," Geoghegan said.

"I think that's something that the banking industry is understanding more and more now and the dependency on wholesale funding, I suspect, will reduce, possibly because of legislation that will be introduced to ensure that banks do focus on core deposits as a prerequisite to lending," he said.

(Reporting by Tom Perry; Editing by Greg Mahlich)