The Hong Kong central bank governor warned for the first time yesterday that city banks may be suffering from the subprime crisis and individual banks may begin to operate "in the red".

Losses in subprime-related asset investment, including the structured product in local bank's portfolios, might result in banks losing money, Joseph Yam, chief executive of Hong Kong Monetary Authority (HKMA), said yesterday in Beijing.

This is the second time that Yam warned investors of a US subprime crisis after the US rate cut on Tuesday. It is also the first time he said local banks may lose money because of it.

"Central banks' rate cut and money-injection globally showed that the worst of the subprime crisis has yet to be resolved," he said.

Credit Suisse's chief regional economist for Asia ex-Japan Tao Dong also said on Tuesday that, the US federal rate cut measure was unable to restore the banks' confidence on lending money.

Regarding a long-anticipated "through train" plan, which will allow individual mainlanders to trade Hong Kong shares, Yam said HKMA has submitted a report about mitigating risks for both the mainland and Hong Kong to the central government.

He said some risks can be managed quite effectively, but he added that there was no timetable for the plan.  (By Kwong Man-ki)