Overseas banks seen flouting rules
Local bankers are demanding clarification of rules governing overseas banks' representative offices in Hong Kong after complaints some offices are running rings around existing guidelines.
According to Hong Kong Monetary Authority guidelines, representative offices should confine their business to 'representational and liaison activities'.
This includes 'marketing a bank's services to customers in Hong Kong and acting as a channel of communication'.
The guidelines prevent representative offices from 'engaging in banking business or in any financial activities of a type or nature that are normally transacted between a bank and its customers'.
Local banks have alleged several representative offices are soliciting overseas mortgage business while others are engaged in deposit-taking for head offices at home.
'Some have turned their representative offices into sales offices, faxing terms and conditions of their products to customers or financial advisers who solicit business on the offices' behalf,' one banker said.
'They seem to be testing the limit and pushing the boundary further and further out in terms of their promotions.' A recent example featured a British bank advertising its overseas mortgage services in a trade publication. Readers were advised to telephone the representative office which then provided all the product details and application forms.
Alex Au Mou-cheung, chairman of the Association for Restricted Licence Banks and Deposit-taking Companies, said such advertising was a flagrant breach of the rules.
He said it was acceptable to publicise the office's presence and list the services its head office could provide.
'But to actively solicit and invite business should not be allowed,' he said.
Mr Au said he was aware several representative offices were acting as mailing centres for deposit-taking by accepting cheques and re-directing them to the head offices.
'Maybe some banks are trying to cash in on some locals' concern over the political development here,' a banker said.
There are about 157 representative offices in Hong Kong.
Under the three-tier banking system, an overseas bank has to maintain a representative office for at least one to two years before being considered for one of the tiers.
BOUNDARIES IN JEOPARDY Local bankers call on authority to issue clearer regulations Representative offices said to engage in banned practices Foreign banks seen cashing in on political uncertainty