The Three-tier Banking System
Hong Kong maintains a three-tier system of deposit-taking institutions, namely, licensed banks, restricted licence banks, deposit-taking companies. They are collectively known as authorized institutions.
Hong Kong has one of the highest concentration of banking institutions in the world. Seventy of the largest 100 banks in the world have an operation in Hong Kong. For more information, see the latest Monthly Statistical Bulletin and Authorization of Authorized Institutions.
Only licensed banks may operate current and savings accounts, and accept deposits of any size and maturity from the public and pay or collect cheques drawn by or paid in by customers.
Restricted Licence Banks
Restricted licence banks are principally engaged in merchant banking and capital market activities. They may take deposits of any maturity of HK$500,000 and above.
Deposit-taking companies are mostly owned by, or otherwise associated with, banks. These companies engage in a range of specialised activities, including consumer finance and securities business. They may take deposits of HK$100,000 or above with an original term of maturity of at least three months.
Local Representative Offices
Overseas banks may establish local representative offices in Hong Kong. However, these offices are not allowed to engage in any banking business and their role is confined mainly to liaison work between the bank and its customers in Hong Kong.
Authorized Institutions and Local Representative Offices
Authorization of Authorized Institutions
The authorization criteria for authorized institutions ensure that only fit and proper institutions are entrusted with public deposits. These criteria are clearly set out in the Seventh Schedule to the Banking Ordinance. The HKMA has also set out its interpretation of each of the minimum authorization criteria in a Guide to Authorization. The HKMA conducts periodic reviews of the authorization criteria and, when necessary, introduces amendments to reflect the changing needs of the regulatory environment and to meet new international standards.
Under the Banking Ordinance, the HKMA is the licensing authority responsible for the authorization, suspension and revocation of authorized institutions. To provide checks and balances, the HKMA is required under the Ordinance to consult with the Financial Secretary on important authorization decisions, such as suspension and revocation. The Chief Executive-in-Council is the appellate body for hearing appeals against decisions made by the HKMA.
Hong Kong places no barrier to overseas banks operating locally in the territory, whether the transactions are conducted in Hong Kong dollars or other currencies
Under the Deposit Protection Scheme Ordinance, every bank in Hong Kong is a member of the Scheme unless it is otherwise exempted by the Hong Kong Deposit Protection Board.