Hong Kong’s banking system must make bona fide firms feel at home

PUBLISHED : Thursday, 22 September, 2016, 4:37pm
UPDATED : Thursday, 22 September, 2016, 8:57pm

I refer to news reports on the difficulties being faced by new companies trying to open bank accounts in Hong Kong and the steps taken by the authorities in Hong Kong to address these grievances.

Many international investors, irrespective of scale, prefer Hong Kong over other locations. They do so because it has the best infrastructure, world-class banking, a supportive government and business-friendly income tax regulations. All these factors can work only when they have access to smooth and healthy banking channels.

Banks have become slow when it comes to companies which are establishing offices or subsidiaries here and wish to open accounts.

Many small firms face difficulties satisfying banks’ KYC [know your customer] queries. Compliance has become the new buzzword in the banking community. Increasing risk of regulatory penalties from different countries have made banks abysmally cautious. This is inconvenient for genuine businesses interested in expanding in Hong Kong.

Of course, it cannot be denied that banking channels are sometimes used to transfer funds where the source and use may be criminal in nature.

It it is very difficult for banks to scrutinise the source of funds in different countries with different sets of laws. Ultimately the onus is on the bank to prove it has exercised due caution to avoid being prosecuted and penalised.

Hong Kong has been a preferred destination, as I said, because of its tax culture, but also because of its location and ports. But it is also important to have a flexible banking structure where bona fide businesses can operate with ease.

Banks should be more vigilant to avoid suspicious transactions, but they must also avoid discouraging genuine firms wishing to establish themselves in the city. The Hong Kong economy depends on volumes of trade being routed through here and business transactions taking place.

External trade depends on external factors which are, sometimes, beyond the control of local government. Therefore, a synergic approach by the government and banks will be helpful in attracting trade from different destinations.

Hong Kong also needs to highlight the important role it has played to promote international trade. Companies from different parts of the world have been encouraged to set up subsidiaries, offices and miscellaneous service centres, which have boosted that international trade.

A prudent approach is needed. Regulations that are too stringent may have a negative impact on the economy.

Amitabh Banerjee, Wan Chai