The Hong Kong Monetary Authority (HKMA) has done a review of the Guideline on Authorization of Virtual Banks that was first issued in 2000. In order to keep up with fintech development, Hong Kong’s de facto central bank last week issued a draft of the updated version of the guideline for public consultation.
Some of the rules remain unchanged. For example, virtual banks looking to set up operations in Hong Kong will need to have at least HK$300 million in capital.
There has to be a concrete and credible business plan, and the virtual bank needs to properly manage the risks associated.
Also, the banks will be subject to the same set of supervisory principles and key requirements applicable to conventional banks.
There are also some changes. For instance, authorities will allow banks, financial institutions and tech firms to own and operate virtual banks.
China CITIC Bank International said it will soon launch a mobile app that will enable customers to open new accounts on their handsets. The project has already passed the sandbox scheme of HKMA, and will be launched in the first quarter of this year.
It’s quite difficult for traditional banks to open many new physical branches in Hong Kong due to the exorbitant property rental costs. The virtual bank format is one of the options for firms to launch fintech projects in the city without brick-and-mortar branches.
This article appeared in the Hong Kong Economic Journal on Feb 12
Translation by Julie Zhu
[Chinese version 中文版]
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