On 30 May 2018, the Hong Kong Monetary Authority
(HKMA) issued a revised Guideline on
Authorization of Virtual Banks (the
"Guideline"). In principle, a virtual
bank is subject to the same authorisation criteria and requirements
as a conventional bank. In addition to the Guideline on Minimum
Criteria for Authorization which applies to conventional
banks, the Guideline provides specific guidance on how the HKMA
will apply the minimum authorisation criteria set out in the
Seventh Schedule to the Banking Ordinance (the
"Ordinance") to a virtual bank.
The Guideline is issued as part of the package of initiatives to
bring about a New Era of Smart Banking in Hong Kong. The aim is to
encourage the development of virtual banks in Hong Kong, with the
objectives of promoting application of financial technology and
facilitating financial inclusion. The revision of the Guideline
demonstrates the HKMA's willingness to adapt appropriately to
cater for features unique to the operation of virtual banks, whilst
preserving the security of the financial system of Hong Kong and
its position as a major international financial centre.
The Guideline was first issued in year 2000. The principles and
requirements in the initial version are clarified and enhanced in
the revised version. Major requirements, key updates and
refinements include the following:
Ownership |
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Physical presence |
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Minimum capital requirement Fees |
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Record keeping |
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Technology risk and risk management |
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Business plan |
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Exit plan |
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In addition to the above, the Guideline also contains principles covering other aspects of a banking operation, such as consumer protection and outsourcing. The HKMA is reviewing its existing prudential requirements to streamline any possible frictions to the use of digital banking services, and also working with the Privacy Commissioner for Personal Data to provide greater clarity on how the existing personal data protection requirements will apply in the context of online banking. Where appropriate, the HKMA is expecting to provide further guidance with respect to existing anti-money laundering and know-your-customer requirements.
In evaluating the applications received, the HKMA will give due regard to the extent to which the authorisation of the applicant will promote fintech and innovation, new customer experience and financial inclusion in Hong Kong. Priority will be given to applicants that can demonstrate:
- adequate financial, technology and other relevant resources;
- credible and viable business plan to provide new customer experience and promote financial inclusion and fintech development;
- appropriate IT platform to support business plan; and
- readiness to commence operation soon after a license is granted.
The HKMA has begun receiving applications for virtual bank license since February 2018. Applicants interested in being in the first batch of applications to be processed should submit a substantially completed application to the HKMA by 31 August 2018. The HKMA is expecting to start granting licenses to virtual banks towards the end of 2018 or in the first quarter of 2019. As virtual banking is a relatively new type of banking business model, applicants will be expected to devote extensive resources to working closely with the regulator.
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