Welcoming Remarks at the Hong Kong Association of Banks Briefing Session on Phase 2 of the Mandatory Reference Checking Scheme
Speeches
22 Aug 2025
Welcoming Remarks at the Hong Kong Association of Banks Briefing Session on Phase 2 of the Mandatory Reference Checking Scheme
Alan Au, Executive Director (Banking Conduct), Hong Kong Monetary Authority
- Good afternoon everyone. A warm welcome to all of you here for joining the industry briefing on Phase 2 of the Mandatory Reference Checking Scheme (MRC Scheme) to tackle the “Rolling Bad Apples” phenomenon today.
- Let me start off by thanking the Hong Kong Association of Banks (HKAB) for organising this briefing session today. My colleagues tell me that we have around 400 representatives from over 100 Authorized Institutions (including their appointed recruiting agencies) joining us both in person and virtually. At the HKMA, we place great importance on the effective implementation of the MRC Scheme, and I am delighted to see you all for making the effort to attend.
- At the HKMA, we have always been committed to promoting sound bank culture among banks in Hong Kong through the three pillars, namely strong governance, appropriate incentive systems, and effective assessment and feedback mechanism.
- While an appropriate incentive system encourages desirable staff behaviour, and despite our hope that bank staff will always act with integrity, we must acknowledge that there have been cases where staff, having engaged in misconduct at one bank, were able to “roll” to another bank without disclosing their previous misconduct. These “bad apples” are likely to repeat their misconduct, which will not only inflict harm on the new employer, but also pose the risk of misconduct transmitting within the system.
- Some banks had taken measures to address the “Rolling Bad Apples” phenomenon before the launch of the MRC Scheme, but we all know that this challenge cannot be effectively dealt with by individual banks alone. The challenge has indeed been discussed by financial regulators around the world, with the Financial Stability Board having published a report and providing a toolkit on strengthening the governance frameworks to mitigate such misconduct risk. It is encouraging to see that the banking community has been working together with the HKMA to collectively tackle the issue and devise the MRC Scheme having regard to international experiences as well as local circumstances, resulting in the finalisation of the Scheme in 2022.
- Since the speakers from the HKAB will walk you through the refinements introduced in Phase 2 of the MRC Scheme, including the revised guidelines and FAQs, I will not go into details here. Instead, I would like to take the opportunity to share some of our observations from the implementation of Phase 1 of the MRC Scheme.
- As promoted by the HKMA and the industry associations, Phase 1 of the MRC Scheme was successfully launched in May 2023, covering approximately 3,500 senior staff of banks. We appreciate the efforts of all the banks involved in ensuring the smooth implementation of Phase 1. Feedback from the industry highlighted that a clear set of guidelines and FAQs are crucial in providing a structured framework for consistent implementation across banks. Some banks also shared that their experience with similar initiatives in other jurisdictions has facilitated the effective implementation of the MRC Scheme in Hong Kong.
- Following the launch of Phase 1, around 700 reference checks have been conducted by banks under the MRC Scheme, of which only nine involved negative information. Although the figure is small (accounting for about 1% of the total), it is very meaningful as it demonstrates that potential “bad apples” can indeed be identified under the Scheme, thereby preventing bank staff from concealing their misconduct when changing jobs.
- The success of this important industry initiative would not have been possible without the full support of all the banks involved and their staff in various teams, including but not limited to those in human resources, legal and compliance, as well as senior management, to name a few. I would also like to extend my gratitude to the industry working group led by the HKAB, which has been working very hard with the HKMA in the past few months to refine the MRC Scheme, taking into account the industry feedback in Phase 1.
- We are delighted to see the strong industry support to move forward to the next phase. Phase 2 of the Scheme, to be implemented on 30 September 2025, will expand the coverage to a total of approximately 50,000 staff members, including those who are licensed or registered to carry on securities, insurance or Mandatory Provident Fund regulated activities.
- Given the expanded scope of Phase 2, I understand that banks are currently preparing for implementation. In particular, I would encourage banks to develop a good communication plan with relevant bank staff and stakeholders, including job applicants or prospective employees. As part of the refinement of the Scheme, a new set of FAQs has been developed to ensure consistent messaging and expectations for all in-scope individuals.
- Moreover, to address the “Rolling Bad Apples” phenomenon in the wider financial services industry, the HKMA will continue to explore possible expansion and integration with similar initiatives in other financial sectors with other regulators.
- I trust that today’s briefing session will be a fruitful and informative one to help banks get prepared. We look forward to collaborating with the industry to ensure the smooth implementation of Phase 2 of the MRC Scheme, and achieving another important milestone in advancing sound culture in the banking industry.
- Thank you very much.
