Privacy Complaints. We use cookies to ensure the best browsing experience on our website. Click here to learn more. Hong Kong. Security Advisory. Cookies Notice. Moreover, protected deposits can be in HK dollar, renminbi, or any kind of foreign currency. Note, however, that deposits taken by restricted license banks and deposit-taking companies are not under the protection of this scheme.
A virtual bank does not deliver its business activities in physical branches. It refers to the bank principally conducting retail banking services via the internet or some other means of electronic vehicles.
The emergence of virtual banking in Hong Kong plays an important role in marking the footstep of Hong Kong into the Era of Smart Banking. To get a virtual bank licensed in Hong Kong, there are some important documents submitted on the application, some of which include a credible and viable business plan, an exit plan, an assessment report of its technology system, a description of risk-based management, etc.
Currently, there are 8 virtual banks in Hong Kong. A big plus for these fintech solutions is that you do not need to visit Hong Kong for opening a bank account. The presences of MSOs increasingly become widely-used alternatives to traditional banks and virtual banks in Hong Kong. Learn more: Alternatives to traditional bank accounts in Hong Kong. Content Team. Table of Contents. All deposit-taking companies are incorporated in Hong Kong.
Restricted Banks Restricted license banks are actually merchant banks and investment banks. Deposit-taking companies These are companies established or connected with the licensed banks or banks incorporated outside Hong Kong.
Up to now, 13 deposit-taking companies in Hong Kong are all incorporated inside Hong Kong. The ratio of the total amount of loans written off during a period to total outstanding amount of loans at the end of that period. This ratio measures the gross credit loss of a loan portfolio over a specified period of time. Charge-off policies vary from institution to institution. For credit card lending, normally, an account will be written off when the receivable has been overdue for more than days or when the ultimate repayment of the receivable is unlikely e.
To better assess the asset quality of the credit card lending portfolio, the credit card charge-off ratio should be read in conjunction with the delinquency ratio. The charge-off ratio is annualised, whereas the delinquency ratio is measured by using the period-end position. Paper cheques are settled daily in a bulk run at a specific time by multilateral netting.
When the amounts required to settle paper cheque payments are substantial, banks , having known their net cheque settlement positions, may make use of the CHATS Optimiser to make offsetting CHATS payments to their counterparties during the bulk settlement run. This helps the banks to manage their liquidity positions more efficiently and relieves them from the need to sit on substantial amounts of money for meeting their payment obligations in the bulk settlement run.
The account maintained by banks with the central bank, or clearing house, for the purpose of paying and settling transactions between the banks themselves or between the banks and the central bank.
A system established for i the clearing or settlement of payment obligations, ii the clearing or settlement of obligations for the transfer of book entry securities, or the transfer of such securities.
A computer-based system established in Hong Kong for the electronic processing and settlement of interbank fund transfers.
CEPA aims at strengthening trade and investment co-operation between the Mainland and Hong Kong through progressively reducing tariff and non-tariff barriers on trade in goods and services, and facilitating trade and investment activities. CEPA is designed to offer new business opportunities on the Mainland for Hong Kong enterprises and professionals and increase Hong Kong's attractiveness to overseas investors. It allows banks and financial institutions to quote indicative bid and offer prices for bonds and to provide related bond information, making it easier for retail investors to participate in the bond market.
The Code took effect on 14 July It sets out the minimum standards for a wide range of personal banking services provided by authorized institutions , including the operation of accounts and loans, card services, payment services and debt collection. The HKMA requires all authorized institutions to comply with the Code and monitors authorized institutions' compliance with the Code as part of its regular supervision.
The Code is subject to review and revision from time to time. A code approved by the Monetary Authority under section 97M of the Banking Ordinance to provide guidance in respect of any of the provisions in any rules made by the Monetary Authority under section 60A 1 , 81A 1 , 97C 1 or 97H 1 of the Banking Ordinance in relation to disclosure requirements, limitations on exposures and interests, capital requirements and liquidity requirements applicable to authorized institutions.
A voluntary code jointly produced by eight payment card scheme operators in Hong Kong with the endorsement of the HKMA. The Code specifies general principles for the scheme operators to observe in order to promote the general safety and efficiency of payment cards in Hong Kong and to foster public confidence in them.
A statute enacted in to make provision for the issue of legal tender coins in Hong Kong. See credit reference agency. A committee hosted by the Bank for International Settlements that sets international standards to promote, monitor and make recommendations about the safety and efficiency of payment, clearing, settlement and related arrangements, thereby supporting financial stability and the wider economy.
The Committee has three major tasks: systematic short-term monitoring of global financial system conditions; long-term analysis of the functioning of financial markets; and the articulation of policy recommendations aimed at improving market functioning and promoting stability. The Committee meets quarterly in Basel. It includes capital instruments that meet the qualifying criteria set out in Schedule 4A to the Banking Capital Rules , share premium resulting from the issue of Common Equity Tier 1 capital instruments, retained earnings, other disclosed reserves, and minority interests arising from Common Equity Tier 1 capital instruments issued by consolidated bank subsidiaries of the authorized institution and held by third parties.
See also capital buffers and Tier 1 capital. See also capital adequacy ratio. The global supervision by the HKMA of locally incorporated authorized institutions. The supervision embraces, among other matters, capital adequacy, concentration of exposures, and liquidity.
It covers an institution's subsidiaries as well as local and overseas branches. The main objective is to enable the HKMA to assess any weaknesses within a banking or financial group that may affect the authorized institution itself, and, if possible, to initiate preventive or remedial action. A global clearing and settlement system for cross-border foreign exchange transactions.
The System is operated by CLS bank International which is owned by over 70 global banking and financial institutions. It enables foreign exchange transactions involving the CLS eligible currencies to be settled through the CLS System on a payment-versus-payment basis, thus eliminating the settlement risk in these transactions.
An undertaking by a central bank or Currency Board to convert domestic currency into foreign currency and vice versa at a fixed exchange rate. Within the Convertibility Zone between 7. The four broad principles governing these operations are 1 All operations within the Convertibility Zone should be carried out in strict accordance with Currency Board rules: that is, both the stock and changes in the Monetary Base should be fully backed by US dollar assets. See also Currency Board System.
Pursuant to Key Attribute 9, COAGs should be in place for all global systemically important financial institutions at a minimum. A set of minimum standards for sound prudential regulation and supervision of banks and banking systems issued by the Basel Committee on Banking Supervision. They are used by jurisdictions as a benchmark for assessing the quality of their supervisory systems and for identifying future work to achieve a baseline level of sound supervisory practices.
Corporate governance refers to the processes and the related organisational structures, by which organisations are directed, controlled and held to account. It involves a set of relationships between a company's management, its board, its shareholders, and other stakeholders.
In the banking industry, corporate governance signifies the manner in which the business and affairs of individual banks are directed and managed by their board of directors and senior management. It also provides the structure through which the objectives of the institution are set, the strategy of attaining those objectives is determined and the performance of the institution is monitored.
The HKMA has issued a number of guidelines on corporate governance applicable to all authorized institutions in Hong Kong since These guidelines are reviewed by the HKMA on a regular basis to take into account international developments and to keep in pace with international best practice. In essence it is a mechanism to build up additional capital during periods of excessive credit growth when risks of system-wide stress are observed to be growing markedly. See also capital buffers.
A credit risk that the counterparty to a financial contract could default before the final settlement of the cash flows of the contract. The key difference between CCR and the credit risk incurred by granting a loan is that the amount of CCR exposure will vary with the market value of the contract throughout its life and either counterparty to the contract may suffer a loss.
An entity that engages in the collection, maintenance and dissemination of information about borrowers' creditworthiness to facilitate credit assessment by credit providers. The initiative aims to address the need for authorized institutions to have better information about their corporate customers, particularly in relation to small and medium sized enterprises. Pursuant to Key Attribute 8, CMGs should be in place for all global systemically important financial institutions.
An activity or operation carried on, or a service provided, by a financial institution on which an entity other than a group company of that financial institution relies; and that, if discontinued, would be likely to i lead to the disruption of services that are essential to the economy of Hong Kong; ii undermine the general confidence of participants in the financial market in Hong Kong; or iii give rise to contagion within the financial system of Hong Kong.
The Currency Board Account lists the various liabilities and assets relating to the operations of the Currency Board System. On the asset side, it shows US dollar assets designated to back the Monetary Base. On the liability side, it shows the Monetary Base, which includes banknotes and coins issued, the Aggregate Balance , and the outstanding amount of debt paper issued by the Currency Board. Its members include professionals in the financial industry, academics, and senior officials of the HKMA.
A monetary system that complies with the Monetary Rule requiring that any change in the Monetary Base should be matched by a corresponding change in foreign currency reserves in a specified foreign currency at a fixed exchange rate. In operational terms, the Monetary Rule often takes the form of an undertaking by the Currency Board to convert domestic currency into foreign currency reserves at the fixed exchange rate. Specified financial institutions, including Authorized Institutions , and designated non-financial businesses and professions are required under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance to carry out customer due diligence CDD measures in certain circumstances, such as before establishing a business relationship with a customer.
CDD measures generally include the identification and verification of identity of a customer, any beneficial owner of the customer and any person purporting to act on behalf of the customer, as well as obtaining information on the purpose and intended nature of the business relationship established. It provides an effective infrastructure for sharing intelligence on cyber attacks.
The timeliness of receiving alerts or warnings from a commonly shared intelligence platform will help the banking sector as a whole to prepare for possible cyber attacks. It is a risk-based framework for Authorized Institutions to assess their own risk profiles and benchmark the level of defence and resilience that would be required to accord appropriate protection against cyber attacks.
On the other hand, Stored Value Facilities Licensees are subject to another C-RAF which is specifically designed for them given their different business nature and risk profile. The ratio of the total amount of loans overdue for more than three months to total outstanding amount of loans.
This ratio provides an indication of the asset quality of the loan portfolio. A securities delivery arrangement in which the delivery of securities takes place as soon as payment is made for them and confirmed final and irrevocable. See also payment versus payment PvP. A scheme to provide statutory protection to bank depositors.
Established and maintained by the Hong Kong Deposit Protection Board , the Scheme would help strengthen public confidence in the banking system and contribute to the maintenance of financial stability. All licensed banks in Hong Kong are members of the scheme unless otherwise exempted by the Board. The Ordinance was enacted on 5 May to provide for the establishment of a deposit protection scheme in Hong Kong.
See also Banking Advisory Committee. One of the three types of authorized institutions in Hong Kong under the Banking Ordinance.
These companies are mostly owned by, or otherwise associated with, banks. They engage in a range of specialised activities, including consumer finance, trade finance and securities business. See also licensed bank , restricted licence bank and Three-tier Banking System.
The phenomenon of financial institutions terminating or restricting business relationships with clients or categories of clients to avoid, rather than manage, risk in line with a risk-based approach. De-risking can be the result of various drivers, such as concerns about profitability, prudential requirements, anxiety after the global financial crisis, and reputational risk. It is a misconception to characterise de-risking exclusively as an anti-money laundering issue.
See also Financial Inclusion. A financial contract whose value is derived from the value of single or multiple underlying assets, indices or events. Common underlying assets include foreign currencies, equities, credit, debt securities, and commodities. Derivatives can be used for hedging, enhancing investment yield, or taking arbitrage opportunities, and cover a wide range of financial contracts including forwards, futures, options, swaps and their various combinations and variations.
A payment system i whose proper functioning is material to the monetary or financial stability of Hong Kong or to the functioning of Hong Kong as an international financial centre, or ii having regard to matters of significant public interest may become a designated system under the PSSVFO. Designated systems are subject to oversight by the HKMA. The interest rate at which banks obtain overnight Hong Kong dollar liquidity from the HKMA through repurchase agreements involving Exchange Fund paper or other eligible paper under the Discount Window.
Base Rate. In Hong Kong, the facility through which banks can borrow Hong Kong dollar funds overnight from the HKMA through repurchase agreements using eligible securities as collateral. See also Discount Rate. The substitution of the domestic currency by a foreign currency in most cases, the US dollar as a unit of account, store of value, and medium of exchange. Dollarisation can be official or unofficial.
Official dollarisation refers to the use of a foreign currency as legal tender in the local economy. Unofficial dollarisation refers to the informal, yet popular, use of a foreign currency, usually in parallel with the circulation of the local currency. An authorized institution AI would be considered a D-SIB if in the opinion of the Monetary Authority the risks associated with the AI are such as to render the AI capable of having a significant impact on the effective working and stability of the banking or financial system of Hong Kong were the AI to become non-viable.
See Loan Classification System. Any restricted licence bank or deposit-taking company may join the DTCA. The objectives of the DTCA include furthering the general interests of restricted licence banks and deposit-taking companies, serving as an intermediary between the Government and members, and acting as a consultative body to the Government on matters concerning the business of taking deposits in Hong Kong.
See also Hong Kong Association of Banks. The nominal effective exchange rate indices NEERI compiled by the Census and Statistics Department of the Government of the Hong Kong Special Administrative Region that measure movements in the weighted average of the nominal exchange rate of the Hong Kong dollar against the currencies of Hong Kong's principal trading partners.
The real effective exchange rate index REERI measures weighted average of nominal effective exchange rates against the currencies of principal trading partners, adjusted for relative movements in price or cost indicators against those selected trading partners.
In effect, the measure reflects the movement of prices of Hong Kong's goods and services relative to those of its major trading partners, and thus is often cited as our indicator of price competitiveness. There is no single measure of REERI, as the index may be constructed using different price indices based on consumer prices, export prices and unit labour costs. Banking services delivered through a public or private network, including the Internet and wireless communication networks. Customers may gain access to e-banking services using an electronic device, such as a personal computer PC , personal digital assistant PDA , automated teller machine ATM , kiosk, or touch-tone telephone.
See also Internet banking. A computerised system for clearing and settling various types of electronic payments through Hong Kong Interbank Clearing Limited. These payments include autopay, electronic clearing items generated by the securities clearing and settlement system the Central Clearing and Settlement System operated by Hong Kong Exchanges and Clearing Limited , and the point-of-sale clearing and settlement system. Settlement by ECG is on a next-day batch-run basis.
Electronic money products are defined as stored value or prepaid products in which a record of the funds or value available to the consumer is stored on an electronic device in the consumer's possession. This includes both prepaid cards sometimes called electronic purses and prepaid software products that use computer networks such as the Internet sometimes called digital cash.
These products differ from so-called access products that allow consumers to use electronic means of communication to access otherwise conventional payment services for example, use of the Internet to make a credit card payment or for general "on-line banking". Some e-wallets also allow users to link other channels e. A set of common and transparent competency standards that enables more effective training for new entrants and professional development for existing practitioners, which is conducive to enhancing the level of core competence and on-going talent development of banking practitioners.
Environmental, Social and Governance ESG are factors that can impact sustainability of a company and they cover non-financial considerations, including environmental protection, climate change, pollution, social impact, governance, and anti-corruption. See also responsible investment. A clearing system introduced in Hong Kong in April to improve settlement efficiency and reduce settlement risk of euro transactions in Asian time. The system is also linked to the Central Moneymarkets Unit to provide delivery versus payment settlement of euro-denominated debt securities and repurchase agreement facilities.
A fund established in by the Currency Ordinance later renamed the Exchange Fund Ordinance as a reserve to back the issue of Hong Kong's banknotes. In , the bulk of the foreign exchange assets of the Government's General Revenue Account and all of the assets of the Coinage Security Fund i.
Thus, the resources available to regulate the exchange value of the Hong Kong dollar were centralised in the Fund. The Exchange Fund is under the control of the Financial Secretary and is used primarily for 'affecting, either directly or indirectly the exchange value of the currency of Hong Kong'.
In addition, it may be used to maintain the stability and integrity of the monetary and financial systems of Hong Kong with a view to maintaining Hong Kong as an international financial centre.
The Exchange Fund may be held in Hong Kong currency, foreign exchange, gold or silver, or in such securities or assets as the Financial Secretary considers appropriate after having consulted the Exchange Fund Advisory Committee.
The Governance Sub-Committee monitors the performance of the HKMA and makes recommendations on remuneration and human resources policies, and on budgetary, administrative and governance issues. They constitute direct, unsecured, unconditional and general obligations of the Hong Kong Special Administrative Region Government for the account of the Exchange Fund and have the same status as all other unsecured debt of the Government.
The EFBN Issuance Programme ensures the supply of a significant amount of high-quality Hong Kong dollar debt papers, which can be employed as trading, investment and liquidity management instruments. Banks that maintain Hong Kong dollar clearing accounts with the HKMA may arrange repurchase agreements using their holdings of Exchange Fund papers and other eligible securities as collateral to obtain overnight liquidity from the HKMA through the Discount Window. The indicative pricings are calculated by Reuters based on indicative bid and ask quotes provided by the Eligible Market Markers designated by the HKMA.
The disposal programme was completed on 15 October A statute originally enacted as the Currency Ordinance of The Exchange Fund Ordinance makes provision for the establishment and management of the Exchange Fund and the employment of its assets. The Ordinance requires that the Exchange Fund "shall be used primarily for such purposes as the Financial Secretary thinks fit affecting, either directly or indirectly the exchange value of the currency of Hong Kong and for other purposes incidental thereto.
It also empowers the Financial Secretary to appoint the Monetary Authority to manage the Exchange Fund, among other duties. A listed bond or equity fund that seeks to achieve a total return corresponding to that of its benchmark index by investing in all or a representative sample of the constituent securities of the benchmark index benchmark securities.
One of the unique features of an ETF is the provision of an in-kind creation and redemption mechanism, which helps ensure that the trading price of fund units will be close to the net asset value per unit. Under this mechanism, units of the ETF can be created by surrendering a specified basket of benchmark securities to the fund. In the case of redemption, the fund will provide a basket of benchmark securities in exchange for the units being redeemed.
In most cases, there is a minimum size for in-kind transactions. See also Tracker Fund of Hong Kong. In relation to an authorized institution incorporated in Hong Kong, directors who have definable management responsibilities in addition to their functions as directors.
See also independent directors and non-executive directors. An individual appointed by a registered institution to directly supervise the conduct of one or more regulated activities of that registered institution. Such officer must have received prior written consent from the Monetary Authority. A forum of central banks and monetary authorities in the East Asia and Pacific region established in Three working groups have been established, on payments and market infrastructures, financial market development, and banking supervision.
The HKMA participates in all three working groups as members. A system launched by the HKMA in September to address the increasing market needs for more efficient retail payment services.
Since 1 April , the Financial Secretary introduced a new fee arrangement on the fiscal reserves placed with the Exchange Fund.
Those wishing to do so should contact this office for advice. Judging from the enquiries we have received, it would seem useful If I take this opportunity to clarify the use of banking names and business descriptions by an rlb.
An rlb operating as a branch of an overseas bank may trade under the bank's corporate name. Where that name includes the word bank or its derivatives in any language, it must be used in Hong Kong in immediate conjunction with the phrase "Restricted Licence Bank in equal prominence : for example, "ABC Bank , Restricted Licence Bank.
If the overseas bank does not have the word "bank" in its corporate name, the rlb may trade in Hong Kong under that name without being qualified by the words "Restricted Licence Bank.
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