FINANCIAL AND MONETARY AFFAIRS
Financial Institutions
The Banking Sector
Hong Kong maintains a three-tier system of deposit-taking institutions licensed banks, restricted licence banks and deposit-taking companies-which are collectively called authorised institutions under the Banking Ordinance. The Hong Kong Monetary Authority (HKMA) is the licensing authority for all three types of authorised institutions.
The authorisation criteria for locally incorporated applicants and overseas applicants to become a licensed bank are broadly the same. However, a local applicant incorporated in Hong Kong must, in the opinion of the HKMA, be closely associated and identified with Hong Kong. A local applicant must also have a paid- up capital of at least $150 million and a minimum trading period of 10 years as an authorised institution. The minimum requirements for assets (net of contra items) and public deposits are $4 billion and $3 billion, respectively. For banks incorporated outside Hong Kong applying to establish a branch in Hong Kong in the form of a licensed bank, the minimum requirement for total assets is US$16 billion. A licence may still be granted even if the asset test is not met, provided that the HKMA believes that this would help to promote the interests of Hong Kong as an international financial centre.
Hong Kong imposes no major barriers on overseas banks operating domestically in Hong Kong, whether in Hong Kong dollars or other currencies. Until recently, foreign banks licensed in and after 1978 have been subject to the one-building condition, which effectively restricts these institutions to operate out of one branch. The original intention of imposing a branching restriction on foreign banks was to avoid over-crowding in the retail banking market. Having regard to the latest developments in the banking market, the HKMA is now of the view that this policy has outlived its usefulness and is becoming less relevant to the banking development in Hong Kong. Accordingly, the one-building condition was relaxed in September and, from that time onwards, foreign banks have been allowed to carry out their business in not more than three buildings. In addition, the restriction on the number of regional and back offices that overseas-incorporated institutions can maintain was lifted at the same time. The HKMA will review the situation and consider further relaxation of this policy in 2001.
At the end of December, Hong Kong had 156 licensed banks, of which 31 were locally incorporated. They maintained a total of 1 490 offices in Hong Kong and there were 128 representative offices of foreign banks. The total deposit liabilities of all the licensed banks to customers at the end of December were $3,136.6 billion.
Only licensed banks may operate current or savings accounts. They may also accept deposits of any size and any maturity from the public. All licensed banks must belong to the Hong Kong Association of Banks (HKÁB). The HKAB's Interest Rate Rules set maximum rates payable on Hong Kong dollar savings deposits and time deposits with original maturities of less than seven days, with the exception of deposits of $500,000 or above, for which banks may compete freely.
Applicants for restricted bank licences must have a minimum issued and paid-up capital of $100 million. Restricted licence banks may take call, notice and time deposits of any maturity from the public, but in amounts of not less than $500,000.
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