The Li family holds less than 7 per cent of the stock but controls the board of directors and occupies senior management positions.

Recently, the bank executed a nearly US$1 billion share sale and placement to Japan's Sumitomo Mitsui Banking Corp despite heavy objections and criticism from Elliott.

BEA says the subscription was a good opportunity to broaden its capital base and strengthen its position to meet upcoming Basel III regulations.

Elliott argues that the placement is designed to entrench management and ownership control by the bank's founding family and discriminates against the interests of independent investors. Elliott's interest in the outcome is motivated by its HK$1.8 billion or 2.5 per cent stake in the bank.

The row has raised the level of scrutiny over family management within BEA. The question being asked is if the family ownership and control model is appropriate for post-financial-crisis banking at a time when the industry globally is being compelled to evolve sophisticated risk controls employed by disciplined senior management teams.

Some of the banks that went bust during the crisis in Spain, Greece and Cyprus featured family owners overwhelmed by unforeseen volatility and a punishing liquidity crisis.

While family owned and operated enterprises run successfully in many industries, major changes in the global financial industry following the crisis now require a level of independent corporate governance and management that directly challenges the nature of a family structure. These changes are being aggressively driven by regulators and central bankers.

Data from S&P Capital IQ shows BEA's share price has been a one to three-year relative underperformer compared with the Hang Seng Index and BOC Hong Kong (Holdings).

This is not clear evidence that family members are not good managers, but it does seem to suggest the market is asking if they are the best people to run a publicly listed bank in today's rapidly changing and complicated regulatory environment.

Chairman and chief executive David Li Kwok-po has appointed two of his sons as deputy chief executives.

Concentrating management authority in the hands of family member-owners sits at odds with current industry practice, no matter how conservative a bank's lending policies, even if it has a chief risk officer – as BEA does in the shape of Johnny Mao.

Quite aside from Elliott's profit-motivated challenge, these are legitimate issues of regulation because post-crisis banks are now run as a public trust.

A professionally run operation is in the public interest and banking regulations have become principle-based rather than rule-based. This means that it is not enough for a bank to assert that it is sound and compliant because its balance sheet meets Basel III standards.

Owner-managers must demonstrate and convince the authorities that family-filled organisational structures do not pose a specific risk to credit and investment decisions.

As the global financial crisis showed, banks usually don't slide into a gradual decline like ailing manufacturers. They tend to fail fast with an attendant risk of social chaos requiring government bailout.

Regulators need to decide if Hong Kong can afford to have its third-largest bank run as a family business.

This story has been corrected to remove the error in the orginal which stated that BEA did not have a Chief Risk Officer