82 | Financial and Monetary Affairs
This has opened up a channel for RMB funds in Hong Kong to invest in the Mainland.
Mainland and Hong Kong Closer Economic Partnership Arrangement
The Closer Economic Partnership Arrangement (CEPA) between the Mainland and Hong Kong, which went into force in 2004, gives Hong Kong's financial service providers and professionals greater market access and flexibility for their operations in the Mainland. It has also enhanced Hong Kong's attractiveness to market users and strengthened the city's competitiveness as an international financial centre and the premier capital formation centre for Mainland enterprises.
On May 27, 2010 the Central People's Government and the Government of the Hong Kong Special Administrative Region (HKSAR) signed Supplement VII to CEPA, which, among other things, further strengthened co-operation in financial services.
With regard to banking, a Hong Kong bank that has maintained a representative office in the Mainland for more than one year can apply to set up a wholly foreign-funded bank or a foreign bank branch. A Hong Kong bank's operating institution in the Mainland can apply to conduct renminbi business, if it has been operating for more than two years and profitable for one year prior to the application. Foreign banking institutions established in the Mainland by Hong Kong banks can establish specialised institutions to provide financial services to small enterprises.
Following the approval of the State Council, the Mainland and the Government of the HKSAR agreed to add a new liberalisation measure into the banking sector of CEPA Supplement VII, which stipulates that for a Hong Kong bank's operating institution in the Mainland to apply to conduct RMB business to serve Hong Kong enterprises operating in the Mainland, it should have been operating in the Mainland for more than one year and had been profitable for one year prior to the application.
The timing for implementation of the above commitment will be agreed by the relevant authorities of both sides.
On securities, the Mainland and Hong Kong will deepen co-operation in financial services and product development, and ETFs constituted by Hong Kong listed stocks will be launched in the Mainland at an appropriate time.
Banking Sector
Main Features
Hong Kong maintains three tiers of deposit-taking institutions, comprising licensed banks, restricted licence banks and deposit-taking companies. They are known collectively as Als under the Banking Ordinance. The HKMA is the licensing authority for Als.
Only licensed banks may conduct full banking services, including in particular the provision of current and savings accounts and acceptance of deposits of any size and maturity. Restricted licence banks may take deposits of any maturity of
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