The Hong Kong Monetary Authority (HKMA) has urged banks to take a prudent approach to their insurance and pension businesses to avoid possible financial scandals.
With more and more banks focusing on selling insurance and pension products alongside their traditional business, the banking regulator warned them to be aware of the risks involved.
The HKMA is keen to avoid the type of scandals that have plagued other countries, particularly Britain, where unsuitable products were sold to clients.
In their traditional lending business, the risk facing banks is basically that borrowers fail to repay loans.
In the insurance and pension businesses, however, the biggest risk faced by banks is the loss of their reputation, according to HKMA deputy chief executive David Carse.
'While pension and insurance may give banks new sources of income, these businesses carry a high degree of risk to reputations if something goes wrong,' Mr Carse told a meeting of the Hong Kong Investment Funds Association.
