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Hong Kong’s 3-tier banking system could soon be 2-tier as HKMA proposes scrapping ‘deposit-taking companies’
- ‘The review aims to simplify the structure of Hong Kong’s banking system,’ HKMA boss says
- The 12 remaining deposit-taking companies have five years to upgrade to a higher tier or exit the market completely
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The Hong Kong Monetary Authority has proposed major changes in the city’s three-tier banking system for the first time in four decades in a move that would eliminate the smallest category of lender altogether.
Under the proposals, the 12 existing so-called deposit-taking companies licensed by the HKMA would be required to upgrade themselves to join the other tiers – licensed banks and restricted licence banks – in the next five years, the de facto central bank said on Monday.
“The review aims to simplify the structure of Hong Kong’s banking system, enhancing its vital role in strengthening Hong Kong’s status as an international financial centre,” said Eddie Yue Wai-man, chief executive officer of the HKMA in a statement.
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The HKMA will collect views on the idea until September 25. If approved it would be the first major change to the four-decade old three-tier banking system, streamlining it into a two-tier licensing mechanism.
Deposit-taking companies are normally owned by banks and offer consumer finance, securities business or other commercial lending. They have the lowest capital requirement among the three tiers, at only HK$25 million (US$3.2 million), while they can accept deposits of HK$100,000 or above that must be held for at least three months.
They account for a tiny proportion of customer deposits in Hong Kong.
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