Hong Kong to end deposit-taking companies as part of reform to simplify banking structure
- The 12 existing deposit-taking companies licensed by the HKMA will have to either upgrade to restricted licensed banks in five years or shut down
The Hong Kong Monetary Authority (HKMA) is simplifying the structure of the local banking system, cutting the city’s existing three-tier banking system into two, as part of its biggest reform in four decades.
The 12 existing deposit-taking companies (DTCs) licensed by the HKMA will have to either upgrade to join the second tier and become restricted licence banks in the next five years, or they will have to exit the market voluntarily, according to a statement from the de facto central bank on Monday.
The changes come after the market responded positively to the HKMA’s three-month consultation that ended last September. Hong Kong’s three-tiered banking system was put in place in the early 1980s.
“We are pleased to note the broad support of the respondents to the proposed simplification of the three-tier banking system into two tiers,” Eddie Yue Wai-man, CEO of HKMA, said in the statement.
“The HKMA will provide guidance to the DTCs in their transition [and] will work with the relevant parties to prepare the proposed legislative amendments to implement the proposal.”
To make it easier for the DTCs to upgrade, the HKMA said it does not intend to ask them to submit fresh licence applications. They can convert into restricted licensed banks as long as they can meet the capital requirements and other thresholds at the end of the five-year transition period.