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Hong Kong holds one of the largest representations of international banks around the globe with extensive, historical existence of multinational banks and other financial institutions. Around 71 of the world’s 100 largest banks are present in Hong Kong. In terms of the volume of external transactions, Hong Kong is the world’s 9th largest international banking center. Hong Kong’s banking sector being highly open is one of the crucial components of its financial system. Its Asia’s leading financial center and the second largest in Asia in volume of transactions. Hong Kong has a large concentration of international and domestic banks with more than half of the most important financial institutions of the world.

The banking sector plays a significant part in making Hong Kong as a chief loan syndication hub in the region. It also contributes to Hong Kong’s status as the world’s 7th largest foreign exchange center.

As of Year, 2020, there were 164 licensed banks (31 of which were incorporated in Hong Kong), 17 restricted license banks (12 incorporated in Hong Kong) and 13 deposit-taking companies (all incorporated in Hong Kong) in operation. These 194 authorized institutions function a wide- ranging network of more than 1,300 local branches. In addition, there were 42 local representative offices of overseas banks in Hong Kong. The success of the Hong Kong’s banking and financial services economy is mainly due to its non-discriminatory low tax regime.

Anyone starting a banking/Credit business in Hong Kong need to obtain a license from HKMA. In Hong Kong there is three-tier banking and deposit–taking system. They are divided on the basis of the nature of business, term of deposits and amount accepted.

LICENSED BANKS

includes institutions:

  • Operating current and saving accounts;
  • Accepting deposit of any size and maturity from the public;
  • Paying or collecting cheque drawn by or paid in by customers; and
  • Using the name bank without restriction.

RESTRICTED LICENSE BANKS

  • These organizations are basically involved in merchants and capital market activities.
  • They can take deposits of any maturity of HKD 500,000 and above.

DEPOSIT TAKING COMPANIES

These companies are mostly owned by, or associated with banks or the engage in a range of specialized activities, which includes consumer finance, commercial lending and securities business.

Institutions not qualifying under a full banking license may apply for the restricted type. The system facilitates the presence of a higher number of banking institutions and service providers. Investors can enter the deposit-taking sector and register a company that will provide various services as well as conduct investment banking activities in Hong Kong.

All companies operating in the sector should have a certain amount of liquidity and capital at all times and must submit returns to HKMA. The Banking Ordinance regulates the banking sector and each company must comply with the requirements under the Ordinance.

Most banking service providers are licensed banks. Hong Kong’s stock market is one of the top three stock markets in Asia. The two significant elements that have contributed to the quality of the market are its financial regulatory system which is modern and allows for a high degree of transparency and supervision. Hong Kong is also an offshore Renminbi center.

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