Overview
- Hong Kong has one of the highest concentrations of banking institutions in the world.
- Approximately 70 of the largest 100 banks in the world have an operation in Hong Kong.
- There were 198 authorised institutions and 60 representative offices in Hong Kong as of end-Feb 2012.
- The stature of Hong Kong as a key financial centre is built on its high standard of market transparency, disclosure and prudently supervised financial institutions.
- Hong Kong ranked third in the Global Financial Centres Index (GFCI) by the City of London released in September 2011.
- Hong Kong topped the Financial Development Index by the World Economic Forum’s 2011 Financial Development Report, surpassing New York and London since the index was compiled.
- Hong Kong has arisen as a premier offshore Renminbi (RMB) centre, thanks especially to the scheme for trade settlements in RMB and related financing activities.
Industry Data
|
Number of Reported Institutions (Feb 2012)
|
|
|
Licensed Banks
|
153
|
|
Restricted Licence Banks
|
20
|
|
Deposit-taking Companies
|
25
|
|
Representative Offices of Foreign Banks
|
60
|
|
Total Employment (end-Sept 2011)
|
97,787
|
Sources: Monthly Statistical Bulletin, Hong Kong Monetary Authority; Quarterly Report of Employment, Vacancies & Payroll Statistics, Census & Statistics Department
Service Providers
The banking system in Hong Kong is characterized by its 3-tier system, which is formed by 3 types of banking institutions, namely licensed banks, restricted licence banks and deposit-taking companies, which are authorised to take deposits from the general public.
The 3 tiers of deposit-taking institutions operate under different restrictions. Only licensed banks and restricted licensed banks can be called banks. As of end-Feb 2012, there were 153 licensed banks, 20 restricted licence banks and 25 deposit-taking companies. There were also 60 representative offices of overseas banks.
Range of Services
Banks are among the most important channels for fund-raising in the region. The significance of Hong Kong's banking sector can be reflected by its prominence in the region. The quality of Hong Kong's banking system enables it to play a major role in serving well beyond its boundary. Many Hong Kong-based banks have set up operations in other parts of Asia, typically the Chinese mainland.
According to the Global Financial Centres Index (GFCI) released by the City of London Corporation in September 2011, Hong Kong ranked third in the financial centre league after London and New York.
According to the Financial Development Report 2011 by the World Economic Forum, Hong Kong overtook the United States, United Kingdom and Singapore to top the league. Being the first Asian financial centre to achieve the first rank in Financial Development Index, Hong Kong’s position was bolstered by strong scores in non-banking financial services such as IPO activity and insurance.
Renminbi (RMB) Businesses in Hong Kong
Hong Kong was first allowed by the Chinese government to provide personal RMB business from January 2004 as a pilot scheme. RMB business in Hong Kong has since been expanded. The Chinese mainland announced the Pilot RMB Trade Settlement Scheme (PRTSS) in April 2009, which was a small but an important step of “internationalising” the RMB. The scheme was implemented in July 2009 following the issuance of the related administrative rules. Under the scheme, eligible enterprises in selected mainland cities and regions (that is, Shanghai, Shenzhen, Guangzhou, Zhuhai, Dongguan, Yunnan and Guangxi) were allowed to settle in RMB in trade with their corresponding enterprises in Hong Kong and other selected locations outside the Chinese mainland (that is, ASEAN countries).
In February 2010, the Hong Kong Monetary Authority (HKMA) issued a guideline on offshore RMB businesses, further enhancing the operational efficiency and flexibility for Hong Kong’s offshore RMB business, and facilitating RMB trade and investments among enterprises.
In June 2010, an expansion of the RMB trade settlement scheme was introduced to cover a total of 20 provinces and cities on the mainland and any part of the world outside the mainland.
A breakthrough expansion came in August 2011 to further relax the geographical limit of RMB trade settlement, effectively covering trade of all Chinese importers and more than sixty thousand approved Chinese exporters, with the rest of the world. As a result, more eligible mainland enterprises are able to settle their merchandise and service trades in RMB.
The RMB trade settlement scheme and related facilitation arrangements have brought about many benefits, allowing traders to gain access to a range of new RMB services (including L/C issuance, packing loan, import invoice financing, export invoice discounting, and factoring), reducing the transaction cost of buying/selling in RMB, as well as allowing them to exchange, receive and keep RMB trade receipts offshore.
Over the past few years, RMB trade settlement has become an increasingly popular option among foreign traders doing business with China. In the first three quarters of 2011, around 9% of Chinese external trade was settled in RMB, marking a growing importance of RMB as the trade settlement currency.
Hong Kong has been playing an important role in the cross-border RMB trade settlement, accounting for some 80% of cumulative amount of trade settled in RMB since July 2009. Since the debut of the scheme, the related cross-border remittances totalled RMB 2.3 trillion as of end-2011 (based on HKMA figures). Boosted by the fast expansion of RMB business in Hong Kong, RMB deposits had surged tenfold since July 2009 to RMB 589 billion as at end-2011.
Exports
Hong Kong's banking sector is highly external-oriented. Exports of investment banking services amounted to HKD 1,901 million in 2010, compared to HKD 1,447 million in 2009, up 31% YoY. The mainland is the major export market for Hong Kong's banking services.
Liberalisation of China's Banking Sector
China became a WTO member in December 2001 and all commitments for the banking and financial services had been completely phased in by 2006. In line with China's WTO commitments, the Chinese government has promulgated the "Regulations of the People's Republic of China on Administration of Foreign-funded Banks" with effect from December 2006. The major provisions, among others, are as follows:
- A foreign bank on its own or jointly with any other foreign financial institution can apply to establish a wholly foreign-funded bank in China.
- A foreign financial institution partnering with a Chinese company or enterprise can apply to establish a Chinese-foreign joint venture bank in China.
- The minimum registered capital for a wholly foreign-funded bank or a Chinese-foreign joint venture bank shall be RMB 1 billion or an equivalent amount in convertible currencies.
- A foreign bank that applies for establishing a branch shall satisfy the requirement, among others, that it have the total assets of not less than US$20 billion at the end of the year prior to the submission of the application.
- A wholly foreign-funded bank or a Chinese-foreign joint venture bank may engage in foreign exchange and RMB businesses, including the retail banking businesses like receiving deposits from the general public and conducting bank card businesses.
- As a result, Chinese and foreign banks are now subject to a unified regulatory regime, competing directly with one another under the same market environment and the same supervision regulations.
Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA)
Hong Kong's banking sector is one of the liberalised sectors benefiting greatly under CEPA, with lower barriers set for Hong Kong banks entering the mainland market.
- For Hong Kong banks to set up branches or body corporate on the mainland, the total asset requirement at the end of the year preceding application is lowered to not less than US$6 billion, compared with US$20 billion otherwise for non-CEPA foreign banks.
- There is no requirement for setting up a representative office on the mainland before a Hong Kong bank establishes a joint venture bank on the mainland.
- For mainland branches of Hong Kong banks to apply to conduct RMB business:
- they have been operating on the mainland for more than two years and profitable for one year prior to the application.
- in conducting profitability position of all branches of the bank on the mainland instead of the profitability position of its individual branches.
- According to Supplement VI to CEPA, starting from October 2009, branches of Hong Kong banks in any municipality in Guangdong can apply with the relevant authorities to set up sub-branches in other municipalities within the province.
- Any foreign banking institution established on the mainland by a Hong Kong bank can establish specialised institutions for providing financial services to small enterprises in accordance with the relevant mainland requirements.
- From April 2012, any mainland-incorporated banking institution established by a Hong Kong bank can engage in the sale and distribution of mutual funds as per CEPA Supplement VIII.
The easing of restrictions under CEPA benefits not only Hong Kong newcomers to the mainland market, but also Hong Kong banks that have already operated on the mainland. As at end-Feb 2012, 10 Hong Kong banking and financial services providers (excluding insurance and securities) had obtained certificates of Hong Kong Service Supplier.
Hong Kong banks on the Chinese mainland
As of end-December 2010, there were 13 Hong Kong-incorporated banks with business operations on the Chinese mainland, including eight banks operating through subsidiary banks incorporated on the mainland. The 13 Hong Kong-incorporated banks continued to expand their branch network, maintaining over 300 Mainland branches or sub-branches, either directly or through subsidiary banks. The aggregate on-balance-sheet non-bank exposures of the Hong Kong banking industry to the Mainland amounted to the equivalent amount of HK$1.4 trillion, accounting for 10% of total assets of the industry.
Overview
• Hong Kong has one of the highest concentrations of banking institutions in the world.
• Nearly 70 of the largest 100 banks in the world have an operation in Hong Kong.
• There were 200 authorised institutions and 71 representative offices in Hong Kong at the end of 2008.
• Hong Kong is Asia's third largest loan syndication centre.
• The stature of Hong Kong as a key financial centre is built on its high standard of market transparency, disclosure and prudently supervised financial institutions.
• Hong Kong ranked fourth in the Global Financial Centres Index (GFCI) by the City of London released in March 2009.
• Under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), lower barriers are set for Hong Kong banks entering the Chinese mainland market. Since July 2009, Hong Kong banks have been allowed to settle trade transactions between Hong Kong and the Chinese mainland in Renminbi (RMB).
• According to Supplement VI to CEPA, starting from October 2009, branches of Hong Kong banks in any municipality in Guangdong Province can apply to set up sub-branches in other municipalities within the province.
Industry Data
Sources: Monthly Statistical Bulletin, Hong Kong Monetary Authority; Quarterly Report of Employment, Vacancies & Payroll Statistics, Census & Statistics Department
Range of Services
The banking system in Hong Kong is characterized by its 3-tier system, which is formed by 3 types of banking institutions, namely licensed banks, restricted licence banks and deposit-taking companies, which are authorised to take deposits from the general public.
The 3 tiers of deposit-taking institutions operate under different restrictions. Only licensed banks and restricted licensed banks can be called banks. As of end-June 2009, there were 144 licensed banks, 26 restricted licence banks and 28 deposit-taking companies. Together these authorised institutions operated a comprehensive network of some 1,387 branches. There were also 71 representative offices of overseas banks.
Range of Services
Banks are among the most important channels for fund-raising in the region. The significance of Hong Kong's banking sector can be reflected by its prominence in the region. The quality of Hong Kong's banking system enables it to play a major role in serving well beyond its boundary. Many Hong Kong-based banks have set up operations in other parts of Asia, typically the Chinese mainland.
The banking sector plays a vital role in establishing Hong Kong as the third largest loan syndication centre in Asia, with the total amount reaching USD 4,280 million during first half of year 2009, after Australia and Taiwan, which recorded USD 6,734 million and USD 6,420 million of loan proceeds respectively during the same period.
As of end-July 2009, Hong Kong’s foreign currency reserve assets amounted to US$219.8 billion, the 7th largest in the world. At the end of 2008, Hong Kong’s per capita foreign currency assets were about US$26,000.
According to the Global Financial Centres Index (GFCI) released by the City of London Corporation in March 2009, Hong Kong ranked fourth in the financial centre league after London, New York and Singapore.
Renminbi (RMB) Businesses in Hong Kong
Banks in Hong Kong have been allowed to conduct RMB business for individuals, including RMB deposits, remittances, exchange business and RMB bank cards in the territory since early 2004. RMB deposits in Hong Kong have increased from RMB 12 billion in 2004 to RMB 54 billion as of end-June 2009.
A Real Time Gross Settlement (RTGS) system for RMB was introduced in June 2007 to support the expansion of RMB-denominated business in Hong Kong. On average, 1,270 transactions (valued at RMB 610 million) were handled per day under RTGS in 2008. The transaction volume of payment-versus-payment (PvP) in 2008 reached RMB 85 billion.
Mainland financial institutions, after obtaining approval, are allowed to issue RMB bonds in Hong Kong. The first issue of RMB bonds in Hong Kong, the 3% two-year straight bonds of RMB 5 billion by the China Development Bank was made in July 2007.
The Chinese mainland has also allowed the mainland branches of Hong Kong banks to issue RMB bonds in Hong Kong, and in this connection, HSBC became the first to issue RMB bonds in Hong Kong in June 2009, with an issuance size of RMB 1 billion targeting institutional investors.
As of end-July 2009, 7 banks, including both local and mainland banks, had issued a total of RMB 24 billion bonds in Hong Kong.
Since July 2009, Hong Kong banks have been allowed to settle in RMB trade transactions between Hong Kong and the Chinese mainland for their customers. Such arrangement can reduce risks arising form the fluctuation in exchange rates while reducing transaction costs; and Hong Kong banks can expand their RMB services form individual clients to enterprises.
As of end-June2009, there were 40 licensed banks conducting RMB banking business in Hong Kong. The total amount of RMB deposits was RMB 54 billion.
Exports
Hong Kong's banking sector is highly external-oriented. Exports of investment banking services amounted to HKD 934 million in 2007, compared to HKD 531 million in 2006, representing a rise of 76% YoY. The mainland is the major export market for Hong Kong's banking services.
Liberalisation of China's Banking Sector
China became a WTO member in December 2001 and all commitments for the banking and financial services had been completely phased in by 2006. In line with China's WTO commitments, the Chinese government has promulgated the "Regulations of the People's Republic of China on Administration of Foreign-funded Banks" with effect from December 2006. The major provisions, among others, are as follows:
• A foreign bank on its own or jointly with any other foreign financial institution can apply to establish a wholly foreign-funded bank in China.
• A foreign financial institution partnering with a Chinese company or enterprise can apply to establish a Chinese-foreign joint venture bank in China.
• The minimum registered capital for a wholly foreign-funded bank or a Chinese-foreign joint venture bank shall be RMB 1 billion or an equivalent amount in convertible currencies.
• A foreign bank that applies for establishing a branch shall satisfy the requirement, among others, that it have the total assets of not less than US$20 billion at the end of the year prior to the submission of the application.
• A wholly foreign-funded bank or a Chinese-foreign joint venture bank may engage in foreign exchange and RMB businesses, including the retail banking businesses like receiving deposits from the general public and conducting bank card businesses.
As a result, Chinese and foreign banks are now subject to a unified regulatory regime, competing directly with one another under the same market environment and the same supervision regulations.
Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA)
Hong Kong's banking sector is one of the liberalised sectors benefiting greatly under CEPA, with lower barriers set for Hong Kong banks entering the mainland market.
• For Hong Kong banks to set up branches or body corporate on the mainland, the total asset requirement at the end of the year preceding application is lowered to not less than US$6 billion, compared with US$20 billion otherwise for non-CEPA foreign banks.
• There is no requirement for setting up a representative office on the mainland before a Hong Kong bank establishes a joint venture bank on the mainland.
• For mainland branches of Hong Kong banks to apply to conduct RMB business:
- they have been operating on the mainland for more than two years;
- in conducting profitability position of all branches of the bank on the mainland instead of the profitability position of its individual branches.
• Applications for setting up bank branches by Hong Kong banks in the central Western and north eastern areas and in the Guangdong will be given priority, thus speeding up access of Hong Kong banks on the mainland.
• According to Supplement VI to CEPA, starting from October 2009, branches of Hong Kong banks in any municipality in Guangdong can apply with the relevant authorities to set up sub-branches in other municipalities within the province.
The easing of restrictions under CEPA benefits not only Hong Kong newcomers to the mainland market, but also Hong Kong banks that have already operated on the mainland. As at end-July 2009, nine Hong Kong banking and financial services providers (excluding insurance and securities) had obtained certificates of Hong Kong Service Supplier.
Hong Kong banks on the Chinese mainland
As of end-December 2008, there were 14 Hong Kong-incorporated banks with business operations on the Chinese mainland, including seven banks having restructured their mainland branches into mainland-incorporated subsidiary banks and one bank having acquired a mainland bank. Seven out of eight mainland-incorporated subsidiary banks were allowed to conduct full-scope RMB business in serving mainland residents. At the year-end of 2008, these 14 locally incorporated banks maintained more than 200 mainland branches and sub-branches on the Chinese mainland.
Foreign banks on the Chinese mainland
As of May-2009, 26 foreign banks had gained local incorporation status on the Chinese mainland Mainland-incorporated foreign banks, subject to regulatory approval, are allowed to provide a full range of banking services to mainland residents. Hong Kong-based banks which have incorporated on the Chinese mainland include HSBC, Bank of East Asia, Standard Chartered Bank and Wing Hang BankOverview
• Hong Kong has one of the highest concentrations of banking institutions in the world.
• Nearly 70 of the largest 100 banks in the world have an operation in Hong Kong.
• There were 200 authorised institutions and 71 representative offices in Hong Kong at the end of 2008.
• Hong Kong is Asia's third largest loan syndication centre.
• The stature of Hong Kong as a key financial centre is built on its high standard of market transparency, disclosure and prudently supervised financial institutions.
• Hong Kong ranked fourth in the Global Financial Centres Index (GFCI) by the City of London released in March 2009.
• Under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), lower barriers are set for Hong Kong banks entering the Chinese mainland market. Since July 2009, Hong Kong banks have been allowed to settle trade transactions between Hong Kong and the Chinese mainland in Renminbi (RMB).
• According to Supplement VI to CEPA, starting from October 2009, branches of Hong Kong banks in any municipality in Guangdong Province can apply to set up sub-branches in other municipalities within the province.
Industry Data
Sources: Monthly Statistical Bulletin, Hong Kong Monetary Authority; Quarterly Report of Employment, Vacancies & Payroll Statistics, Census & Statistics Department
Range of Services
The banking system in Hong Kong is characterized by its 3-tier system, which is formed by 3 types of banking institutions, namely licensed banks, restricted licence banks and deposit-taking companies, which are authorised to take deposits from the general public.
The 3 tiers of deposit-taking institutions operate under different restrictions. Only licensed banks and restricted licensed banks can be called banks. As of end-June 2009, there were 144 licensed banks, 26 restricted licence banks and 28 deposit-taking companies. Together these authorised institutions operated a comprehensive network of some 1,387 branches. There were also 71 representative offices of overseas banks.
Range of Services
Banks are among the most important channels for fund-raising in the region. The significance of Hong Kong's banking sector can be reflected by its prominence in the region. The quality of Hong Kong's banking system enables it to play a major role in serving well beyond its boundary. Many Hong Kong-based banks have set up operations in other parts of Asia, typically the Chinese mainland.
The banking sector plays a vital role in establishing Hong Kong as the third largest loan syndication centre in Asia, with the total amount reaching USD 4,280 million during first half of year 2009, after Australia and Taiwan, which recorded USD 6,734 million and USD 6,420 million of loan proceeds respectively during the same period.
As of end-July 2009, Hong Kong’s foreign currency reserve assets amounted to US$219.8 billion, the 7th largest in the world. At the end of 2008, Hong Kong’s per capita foreign currency assets were about US$26,000.
According to the Global Financial Centres Index (GFCI) released by the City of London Corporation in March 2009, Hong Kong ranked fourth in the financial centre league after London, New York and Singapore.
Renminbi (RMB) Businesses in Hong Kong
Banks in Hong Kong have been allowed to conduct RMB business for individuals, including RMB deposits, remittances, exchange business and RMB bank cards in the territory since early 2004. RMB deposits in Hong Kong have increased from RMB 12 billion in 2004 to RMB 54 billion as of end-June 2009.
A Real Time Gross Settlement (RTGS) system for RMB was introduced in June 2007 to support the expansion of RMB-denominated business in Hong Kong. On average, 1,270 transactions (valued at RMB 610 million) were handled per day under RTGS in 2008. The transaction volume of payment-versus-payment (PvP) in 2008 reached RMB 85 billion.
Mainland financial institutions, after obtaining approval, are allowed to issue RMB bonds in Hong Kong. The first issue of RMB bonds in Hong Kong, the 3% two-year straight bonds of RMB 5 billion by the China Development Bank was made in July 2007.
The Chinese mainland has also allowed the mainland branches of Hong Kong banks to issue RMB bonds in Hong Kong, and in this connection, HSBC became the first to issue RMB bonds in Hong Kong in June 2009, with an issuance size of RMB 1 billion targeting institutional investors.
As of end-July 2009, 7 banks, including both local and mainland banks, had issued a total of RMB 24 billion bonds in Hong Kong.
Since July 2009, Hong Kong banks have been allowed to settle in RMB trade transactions between Hong Kong and the Chinese mainland for their customers. Such arrangement can reduce risks arising form the fluctuation in exchange rates while reducing transaction costs; and Hong Kong banks can expand their RMB services form individual clients to enterprises.
As of end-June2009, there were 40 licensed banks conducting RMB banking business in Hong Kong. The total amount of RMB deposits was RMB 54 billion.
Exports
Hong Kong's banking sector is highly external-oriented. Exports of investment banking services amounted to HKD 934 million in 2007, compared to HKD 531 million in 2006, representing a rise of 76% YoY. The mainland is the major export market for Hong Kong's banking services.
Liberalisation of China's Banking Sector
China became a WTO member in December 2001 and all commitments for the banking and financial services had been completely phased in by 2006. In line with China's WTO commitments, the Chinese government has promulgated the "Regulations of the People's Republic of China on Administration of Foreign-funded Banks" with effect from December 2006. The major provisions, among others, are as follows:
• A foreign bank on its own or jointly with any other foreign financial institution can apply to establish a wholly foreign-funded bank in China.
• A foreign financial institution partnering with a Chinese company or enterprise can apply to establish a Chinese-foreign joint venture bank in China.
• The minimum registered capital for a wholly foreign-funded bank or a Chinese-foreign joint venture bank shall be RMB 1 billion or an equivalent amount in convertible currencies.
• A foreign bank that applies for establishing a branch shall satisfy the requirement, among others, that it have the total assets of not less than US$20 billion at the end of the year prior to the submission of the application.
• A wholly foreign-funded bank or a Chinese-foreign joint venture bank may engage in foreign exchange and RMB businesses, including the retail banking businesses like receiving deposits from the general public and conducting bank card businesses.
As a result, Chinese and foreign banks are now subject to a unified regulatory regime, competing directly with one another under the same market environment and the same supervision regulations.
Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA)
Hong Kong's banking sector is one of the liberalised sectors benefiting greatly under CEPA, with lower barriers set for Hong Kong banks entering the mainland market.
• For Hong Kong banks to set up branches or body corporate on the mainland, the total asset requirement at the end of the year preceding application is lowered to not less than US$6 billion, compared with US$20 billion otherwise for non-CEPA foreign banks.
• There is no requirement for setting up a representative office on the mainland before a Hong Kong bank establishes a joint venture bank on the mainland.
• For mainland branches of Hong Kong banks to apply to conduct RMB business:
- they have been operating on the mainland for more than two years;
- in conducting profitability position of all branches of the bank on the mainland instead of the profitability position of its individual branches.
• Applications for setting up bank branches by Hong Kong banks in the central Western and north eastern areas and in the Guangdong will be given priority, thus speeding up access of Hong Kong banks on the mainland.
• According to Supplement VI to CEPA, starting from October 2009, branches of Hong Kong banks in any municipality in Guangdong can apply with the relevant authorities to set up sub-branches in other municipalities within the province.
The easing of restrictions under CEPA benefits not only Hong Kong newcomers to the mainland market, but also Hong Kong banks that have already operated on the mainland. As at end-July 2009, nine Hong Kong banking and financial services providers (excluding insurance and securities) had obtained certificates of Hong Kong Service Supplier.
Hong Kong banks on the Chinese mainland
As of end-December 2008, there were 14 Hong Kong-incorporated banks with business operations on the Chinese mainland, including seven banks having restructured their mainland branches into mainland-incorporated subsidiary banks and one bank having acquired a mainland bank. Seven out of eight mainland-incorporated subsidiary banks were allowed to conduct full-scope RMB business in serving mainland residents. At the year-end of 2008, these 14 locally incorporated banks maintained more than 200 mainland branches and sub-branches on the Chinese mainland.
Foreign banks on the Chinese mainland
As of May-2009, 26 foreign banks had gained local incorporation status on the Chinese mainland Mainland-incorporated foreign banks, subject to regulatory approval, are allowed to provide a full range of banking services to mainland residents. Hong Kong-based banks which have incorporated on the Chinese mainland include HSBC, Bank of East Asia, Standard Chartered Bank and Wing Hang Bank..
