Top Hong Kong banker says dollar peg vital for stability

* Bets rising that HK may remove dollar peg

* Peg important for stability- top StanChart (HKSE: 2888-OL.HK - news) banker

* HK can advance without suffrage- HSBC's Cha

By Michelle Price and Lawrence White

HONG KONG, Aug 31 (Reuters) - Hong Kong risks losing an important tool for maintaining its market stability if it scraps its currency's peg to the U.S (Other OTC: UBGXF - news) . dollar, said a top Standard Chartered China executive who also advises the government on financial policy.

The comments by Benjamin Hung, the bank's chief executive for Greater China (HKSE: 0431.HK - news) , come amid speculation that Hong Kong's central bank may remove the peg after China's tumbling stock markets and the surprise devaluation of the yuan sent investors rushing to buy Hong Kong dollars this month.

Speaking to Reuters on Monday, Hung, a member of Hong Kong's advisory Financial Services Development Council (FSDC), said the peg had "tremendous value" in maintaining investor and business confidence in the city state.

"No currency system in the world is perfect," he said. "But on balance do I think the dollar peg is good for the stability of Hong Kong? Yes I do."

Hong Kong's Monetary Authority maintains the peg by buying U.S. dollars, or selling Hong Kong dollars, a system that some analysts believe will come under severe pressure amid China's economic slowdown and capital outflows following expected U.S. rate hikes this year.

Speculation about the future of the peg comes amid a broader debate over Hong Kong's status as an international financial centre, after huge pro-democracy street protests last year raised doubts about the stability of the Chinese special administrative region.

Laura Cha, chairman of the FSDC and non-executive deputy chairman of HSBC Holdings (HKSE: 0005.HK - news) , said Hong Kong could thrive as an international financial centre even without universal suffrage.

"Of course, it would be nice to have, and we want, and the central government and Hong Kong people want to have universal suffrage. That hasn't happened for a variety of reasons, but it shouldn't stop us from moving forward," she told Reuters.

Cha stirred controversy last October after likening the Hong Kong protesters' demands for democracy to the emancipation of slaves. (Editing by Miral Fahmy)