Removal of the Three-building Condition

The Hong Kong Monetary Authority (HKMA) today removed the three-building condition attached to the licences of overseas-incorporated banks authorized in and after 1978 and overseas-incorporated restricted licence banks authorized in and after 1990. From now on, there will be no restriction on the number of branches that these institutions may maintain.

This is part of the Banking Sector Reform Programme announced by the HKMA in 1999 which aims at promoting greater competition in the banking sector and strengthening the safety and soundness of the banking system. In September 1999, this policy was partially relaxed to allow foreign banks to operate from three separate buildings instead of one. The decision to relax this policy is the result of an earlier review conducted by the HKMA. The review showed that this twenty-year-old policy has outlived its usefulness given such factors as advances in technology and the increasing importance of electronic delivery channels.

"The removal of the three-building condition will provide foreign banks with greater flexibility in doing business and will further enhance Hong Kong's reputation as a free and open financial centre," said Mr David Carse, Deputy Chief Executive of the HKMA.

The HKMA today served a notice under section 16(5) of the Banking Ordinance on the relevant institutions to notify them of the removal of this condition. In addition, the guideline on activities that can be conducted at regional offices and back offices by overseas-incorporated institutions has also been repealed. "From now on foreign banks no longer need to worry about the permitted activities in such offices. They can set up unlimited number of offices in unlimited number of buildings. They can also conduct any business they are legally permitted to do within these offices," Mr Carse said.

For further enquiries, please contact:

Jasmin Fung, Manager (Press), at 2878 8246

Hong Kong Monetary Authority

30 November 2001