Establishing a bank in Hong Kong

Establishing a bank in Hong Kong

Hong Kong is a leading global financial hub with a robust regulatory framework governing authorized financial institutions (AIs). Entities seeking to conduct regulated banking activities must obtain authorization from the Hong Kong Monetary Authority (HKMA). This statutory body upholds integrity in Hong Kong's monetary and banking systems.

Types of AIs in Hong Kong

The HKMA utilizes a risk-based, three-tier authorization system. Full-scale retail banks undergo the most rigorous licensing requirements concerning capital levels, liquidity, and corporate governance. Banks with wholesale and investment mandates require compliance at proportional levels. Lastly, deposit-taking institutions fulfil niche services while meeting appropriate standards.

Under the Banking Ordinance, the HKMA is empowered to authorize, suspend, and revoke AI status. The HKMA continually assesses compliance with authorization criteria. These licensing standards apply on an ongoing basis post-authorisation. Key requirements are

The HKMA issues licenses based on an entity's proposed scope of banking services. Applicants must demonstrate ongoing viability across areas like capital adequacy, risk management, and internal controls.

Open a branch of a foreign bank in Hong Kong

The HKMA welcomes both local registrations and foreign bank branches. The latter retains primary oversight from its home regulator but must satisfy the HKMA's authorization criteria. These requirements uphold Hong Kong's status as an open, transparent and competitive banking hub aligned with leading international standards.

Additional authorization criteria

Other licensing prerequisites align with internationally endorsed fundamentals for robust bank regulation in Hong Kong, covering:

• Proper supervision in home jurisdiction for overseas applicants
• Suitable expertise and qualifications of the CEO, directors and officers
• Effectiveness of systems controlling manager appointments
• Financial strength across capital, liquidity, and asset quality
• Adequacy of internal controls and accounting
• Conduct of business in a prudent, diligent and competent manner

Locally incorporated applicants must uphold a min. capital adequacy ratio of 8%. Branches of overseas entities are exempt, since primary oversight lies with their home regulator. However, the HKMA still expects foreign banks to maintain an 8% capital ratio when entering Hong Kong.

As part of sustainably upholding standards, the HKMA periodically reviews authorization criteria and implements amendments to address the evolving regulatory landscape and keep pace with international norms for financial institution governance.

This comprehensive and adaptive approach contributes to Hong Kong's ongoing status as a regulated banking hub aligned with global best practices. It demands substantial commitment from applicants and authorised institutions across prerequisites spanning financial resources, risk management, and operational conduct.

With fintech and globalization reshaping finance, Hong Kong responds through a forward-looking and collaborative model of regulation. The HKMA partners with industry to balance innovation against prudential safeguards, efficiency against accountability. For organizations seeking a Hong Kong banking presence, understanding this regulatory ethos will prove essential.

You can get additional information and order advice on the specifics of licensing banks in Hong Kong from TK Deal specialists.