Bank account opening for small and medium-sized enterprises and start-ups


17 Jun 2016

Bank account opening for small and medium-sized enterprises and start-ups

When I attend functions and meetings these days, as a banking regulator I tend to get an earful of comments from business contacts about their experiences, very often difficult ones, in opening bank accounts in Hong Kong.  The frustrations appear to be more pronounced among start-ups and foreign companies, worse if you happen to tick both boxes.  I am naturally very concerned, given that bank accounts are essential for operating businesses and financial inclusion.  I am surprised that this should happen in Hong Kong, which has a well-developed and highly efficient banking system.

Let me start with the context.  One may recall that, 10 years ago, it was possible to open a bank account rather swiftly.  It’s sobering now to reflect how challenging the process can be for some parts of the community.  In recent years, international efforts in anti-money laundering and counterterrorist financing have been stepped up significantly.  At the same time, global sanction regimes and other regulatory requirements have added to the complexity of the landscape in which banks now operate.  As a result, banks are subject to much tighter international standards in establishing and maintaining relationships with potential and existing customers.  This translates into banks adopting more stringent “customer due diligence” (CDD) measures to verify the background of companies and their beneficial owners, in order to facilitate banks’ ongoing monitoring of transactions after account-opening.  The process is especially stringent for potential customers who have been assessed to pose relatively higher risks. 

Does risk-based approach mean “zero failure”?

That said, the HKMA requires banks in Hong Kong to adopt a risk-based approach, which is an internationally recognised concept that means CDD measures should be applied in a balanced manner, proportionate to the different risks which customers, transactions or services will each present.  It is important to emphasise that the risk-based approach is not a “zero failure” approach, which means that banks ought not to take an overly stringent stance of excluding any risk of improper conduct by their customers.  If properly applied, the approach should help to ensure that legitimate businesses can access banking services and contribute to economic growth.

Is the account opening issue an industry-wide phenomenon?

To try to gauge exactly what is happening, we conducted in April a special survey with several large retail banks in Hong Kong.  Two observations can be drawn from the survey outcome.  First, an average of 10 per cent of account opening applications were rejected by these retail banks.  However, there are one or two banks whose rejection rates were significantly higher than the average.  I appreciate that if your company happens to be among those rejected, these figures offer no comfort.  Nevertheless, this survey suggests that the issue is pertinent in one or two banks rather than being an industry-wide problem.  In this context, we should bear in mind that there are some 150 licensed banks, including some 20 retail banks, operating in Hong Kong so a range of choices do exist for customers.  Second, for the banks with very high rejection rates, they are also usually the first port of call for both local and overseas companies when they seek to open a bank account in Hong Kong.  This may explain the rather unpleasant customer experiences that have been conveyed to us through different channels.

The HKMA is now following up with the banks concerned to understand their account opening and CDD processes.  Our main focus is on the question of whether the risk-based approach is suitably implemented.  We have also reached out to various sources, such as the chambers of commerce and industry associations, to gather more concrete information on specific incidents of difficult account opening experiences.

Meanwhile, some retail banks have indicated to us that they intend to expand their businesses with small and medium-sized enterprises (SMEs).  We have encouraged these banks to make their account opening processes more customer-friendly, such as by introducing an online application feature.

Transparency and fairness to customers are among our key requirements for banks’ business conduct.  In terms of account opening, we have required all retail banks to upload basic information about the relevant procedures and documentation on their websites and to provide adequate training to frontline staff so that they are more responsive when communicating with potential customers. 

One should also note that the problem is not unique to Hong Kong: internationally, it is an increasingly prominent problem that has affected a number of sectors in addition to SMEs, and authorities in different jurisdictions are working to address the problem.  This is a complex subject and there is no easy, quick fix.  But I and my team at the HKMA will collaborate closely with the business community and the banking industry to ensure that access to basic banking services by legitimate businesses, big or small, will not be unreasonably impeded.



Arthur Yuen
Deputy Chief Executive
Hong Kong Monetary Authority

17 June 2016


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Last revision date : 17 June 2016