Banking & Finance

Hong Kong’s Chong Hing Bank eyes ‘Greater Bay Area’, as China moves to open up banking and insurance sectors

Lender hopes Hong Kong banks will be allowed to conduct cross-border business, such as extending loans to Hong Kong customers for property purchases

PUBLISHED : Friday, 18 May, 2018, 7:30am
UPDATED : Friday, 18 May, 2018, 7:30am

Chong Hing Bank has set its eyes on China’s “Greater Bay Area” initiative, and will be hoping for looser regulation over Hong Kong banks doing business there, said Margaret Leung Ko May-yee, the bank’s deputy chairman and managing director.

Beijing’s Greater Bay Area project aims to combine nine cities in the Pearl River Delta with Hong Kong and Macau into a megalopolis of more than 60 million people. The China Insurance Regulatory Commission announced several steps recently to accelerate the opening up of the banking and insurance industries in this area.

Guangzhou government investment arm puts pressure on Chong Hing Bank to expand faster in mainland China

One proposal sought the reduction of the individual customer deposit threshold from 1 million yuan (US$157,052) to 500,000 yuan for foreign bank branches.

Such a policy will allow Hong Kong-incorporated Chong Hing Bank to build its deposit base by increasing its customer deposit accounts, which in turn could lead to the development of its personal mortgage business in the Greater Bay Area, said Leung.

“The first step is you need to have individual deposit accounts to enable you to extend individual mortgages,” Leung, who is retiring on Friday, said in Hong Kong.

The bank, which turns 70 this year, is hoping that policy in the Greater Bay Area will allow Hong Kong banks to conduct cross-border lending businesses, such as extending loans to Hong Kong customers for the purchase of property, Leung added.

Chong Hing Bank gears up for push into China

The demand for Hong Kong dollar denominated loans arises because of their cheaper borrowing cost compared with yuan-denominated debt, a result of the city’s lower interest rates.

The bank has branches in the Greater Bay Area cities of Guangzhou, Shenzhen and Macau, as well as sub branches in Foshan and Zhuhai. It will consider developing business in Dongguan and Zhongshan, said Timothy Zong Jianxin, the bank’s chief executive.

“Given that Shenzhen will focus on the hi-tech sector, Hong Kong banks that want to develop business there may need to think about establishing completely new client relationships as well as the need to readjust their credit risk preferences,” said Zong.

Credit Suisse also sees development potential in the Greater Bay Area driven by a younger population, stronger government support and industry structure, convenient intra-city transport and better integration with the Hong Kong and Macau markets. The bank forecasts property sales volumes to achieve a mean annual growth rate of 5 per cent between 2017 and 2022 for the nine cities.

A key focus of the Greater Bay Area project will be a new regulatory system that will use judicial and market-oriented practices for the settlement of cross-border defaults and bankruptcies.