BANKING SYSTEM OF HONG KONG

The Banking Ordinance was revamped in 1986 and has since undergone several amendments to improve the system of prudential supervision and to reflect the changing needs of the regulatory environment. With effect from 1 April 1993, the former Office of the Commissioner of Banking was merged with the Office of the Exchange Fund to form the Hong Kong Monetary Authority (HKMA). The functions of the former Commissioner of Banking have since been subsumed under the HKMA. Under the Banking (Amendment) Ordinance 1995 enacted on 28 June 1995, the Hong Kong Monetary Authority is responsible for all authorization matters which include, among others, the authorization, suspension and revocation of all three types of authorized institutions (AIs). Furthermore, under the Banking (Amendment) Ordinance 1997 enacted on 8 January 1997, the HKMA is empowered to regulate the issue of multi-purpose stored value cards and money brokers.

Hong Kong maintains a three-tier system of deposit-taking institutions, comprising licensed banks, restricted license banks (RLBs) and deposit-taking companies (DTCs). They are collectively known as AIs. Only licensed banks may operate current and savings accounts, and accept deposits of any size and maturity. RLBs are only allowed to accept deposits of HK$500,000 and above while DTCs are only permitted to accept deposits of a minimum of HK$100,000 with original maturity of not less than three months. RLBs and DTCs are two categories of institutions which provide an opportunity for overseas banks not qualified for a full banking license to set up establishments in Hong Kong to conduct wholesale and investment banking business.

The Capital Accord issued by the Basel Committee has been applied in the territory since end-1989. As Hong Kong is an international financial center, it is an explicit policy of the HKMA that the supervisory framework in Hong Kong should conform as much as possible with international supervisory standards, in particular those recommended by the Basel Committee.
At end-March 2005, there were 133 licensed banks, 39 RLBs, and 35 DTCs in Hong Kong. Of these 207 AIs, 182 were owned by interests from 30 foreign countries. In addition, there were 84 representative offices of foreign banks.

Hong Kong's five largest banks, in terms of total assets, are as follows:

- Hong Kong & Shanghai Banking Corporation (HSBC)
- Bank of China (Hong Kong)
- Hang Seng Bank Ltd
- Standard Chartered Bank
- Hong Kong Branch
- Bank of East Asia Ltd.