HSBC and Standard Chartered risk being caught up in the geopolitical struggle between the US and China after the US House of Representatives passed legislation targeting Chinese officials involved in implementing a national security law in Hong Kong. Banks who do business with officials involved in the security law could face sanctions, amid concerns the security law could be used to crack down on dissent in Hong Kong. More than 370 people were arrested in Hong Kong on Wednesday after the new powers were introduced. London-listed banks HSBC and Standard Chartered – which have significant operations in Hong Kong – have faced criticism from politicians including the UK foreign secretary, Dominic Raab, and US secretary of state, Mike Pompeo, for publicly backing the introduction of the national security law. George Magnus, a research associate at Oxford University’s China Centre, said the US legislation meant that the banks had been caught in a “terrible” position between the US and China. “They really have to be seen to be taking one side’s legal and regulatory directions or another,” he said. “The longer the friction [between the US and China] is maintained at this level, the worse it is for companies like HSBC and Standard Chartered who have to make huge decisions on which side their bread is buttered.” The national security law could open bankers and analysts in Hong Kong to prosecution, Magnus added, giving Beijing even more leverage over companies who operate in the territory. The US legislation passed unanimously. Under congressional rules the bill must return to the senate and be passed there before being sent to the White House for the president, Donald Trump, to sign into law or veto. Chinese foreign ministry spokesman Zhao Lijian said in Beijing on Thursday that the US “must stop advancing the bill, let alone sign it or implement” it. Raab on Wednesday directly criticised the banks for putting profits ahead of the rights of Hong Kong’s citizens. “The rights and the freedoms and our responsibilities in this country to the people of Hong Kong should not be sacrificed on the altar of bankers’ bonuses,” Raab told parliament. It is understood the banks could face the scrutiny of MPs on the Treasury select committee, with at least one member planning to raise the issue. The banks have been criticised by large shareholders in the UK for backing the law, which has since been used to arrest protesters. Roland Bosch, of US-UK investment manager Federated Hermes, this week said: “We expect companies to support improvements in protections for citizens and not back their removal.” David Cumming, chief investment officer at investment manager Aviva, last month said he was “uneasy” about the banks’ statements and that he expected both HSBC and Standard Chartered to “confirm that they will also speak out publicly if there are any future abuses of democratic freedoms connected to this law”. HSBC and Standard Chartered declined to comment when asked about the arrests of protesters on Wednesday under the new law. Months of unrest in Hong Kong before the national security law may have already dented the territory’s reputation as a place to do business, according to an index by Z/Yen Group, which produces a twice-yearly index of financial centres. Hong Kong’s score and ranking on the index fell between September and March mainly because of less positive responses from financial professionals. Mike Wardle, Z/Yen’s head of indices, said: “While the financial market in Hong Kong is strong, any change which makes a financial centre less attractive as a place to live and work is likely to weaken its competitiveness, and may lead people and businesses to consider relocating.” Magnus said he expected the Hong Kong national security law would accelerate the “withering” of the territory’s status as a global financial centre as companies and workers grew more concerned about doing business there.