
Banking regime in Hong Kong
Private & confidential
The Hong Kong Banking Regime

The Hong Kong Monetary Authority (HKMA) is responsible for regulating and
supervising banking business and the business of taking deposits in Hong Kong. It is also
responsible for the authorization, suspension and revocation of “authorized
institutions”.

Hong Kong maintains a three-tier system of deposit-taking institutions, namely, (i)
licensed banks, (ii) restricted licence banks, (iii) deposit-taking companies. They are
collectively known as authorized institutions.

The legal framework for banking supervision in Hong Kong is primarily governed by the
Banking Ordinance. Institutions which intend to carry on banking business or the
business of taking deposits in Hong Kong are required to be authorized by the HKMA
under section 16(1) of the Banking Ordinance.
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The 3-tier Banking System and Local Offices

Licensed banks :
o

Only licensed banks may operate current and savings accounts, and accept
deposits of any size and maturity from the public and pay or collect cheques
drawn by or paid in by customers.
Restricted licence banks :
o
Restricted licence banks are principally engaged in merchant banking and
capital market activities. They may take deposits of any maturity of HK$500,000
and above.
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The 3-tier Banking System and Local Offices

Deposit-taking companies:
o

Deposit-taking companies are mostly owned by, or otherwise associated with,
banks. These companies engage in a range of specialised activities, including
consumer finance and securities business. They may take deposits of
HK$100,000 or above with an original term of maturity of at least three months.
Others – local representatives offices :
o
Overseas banks may establish local representative offices in Hong Kong.
However, these offices are not allowed to engage in any banking business and
their role is confined mainly to liaison work between the bank and its
customers in Hong Kong.
o
The HKMA will approve an application for an local representatives office if it is
satisfied that the bank is adequately supervised by the relevant banking
supervisory authority
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Authorisation of Authorised Institutions

The authorization criteria are clearly set out in the Seventh Schedule to the Banking
Ordinance.

The HKMA has also set out its interpretation of each of the minimum authorization
criteria in its “Guideline on Minimum Criteria for Authorization”.

Hong Kong places no barrier to overseas banks operating locally in the territory, whether
the transactions are conducted in Hong Kong dollars or other currencies.
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Minimum Authorisation Criteria

The general authorisation criteria include, among others :
(i)
Adequacy of home supervision
o
An applicant which is incorporated outside Hong Kong must be a bank
which, in the opinion of the HKMA, is adequately supervised by the
relevant banking supervisory authority.
o
In making his assessment, the HKMA will take account of:

the legal and administrative powers of the home supervisor;

the supervisory framework of the home supervisor;

the method of supervision adopted by, and the resources available
to, the home supervisor; and

past experience in dealings with the home supervisor.
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Minimum Authorisation Criteria
(ii) Identity of controllers
o
The HKMA must be satisfied that he knows the identity of each controller
of the institution.
(iii) Fitness and propriety of directors, controllers, chief executives and
executive officers
o
the HKMA, in general, takes into account, among others, the following
factors:

the person's reputation and character;

the person’s knowledge and experience, competence, soundness of
judgment and diligence;

whether the person has a record of non-compliance with various
non-statutory codes or has been reprimanded or disqualified by
regulators (including overseas regulators) or professional bodies.
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Minimum Authorisation Criteria
(iv) Adequate financial resources
o
The HKMA is a member of the Basel Committee on Banking Supervision
(BCBS) and, in making an assessment of the financial strength of the
institution, the HKMA will have primary regard to the adequacy of its
capital measured in a way which is consistent with the latest applicable
capital standards issued by the BCBS.
o
In the case of an institution incorporated outside Hong Kong, the HKMA
will generally require an overseas bank which wishes to set up a branch or
restricted licensed bank / deposit taking company subsidiary in Hong
Kong to maintain capital levels consistent with those applicable under the
latest Basel Capital Accord.
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Minimum Authorisation Criteria
(v)
Adequate liquidity
o
All authorised institutions in Hong Kong are required to meet a minimum
monthly average liquidity ratio of 25%.
o
This is calculated as the ratio of liquefiable assets (e.g. marketable debt
securities and loans repayable within one month subject to their
respective liquidity conversion factors) to qualifying liabilities (basically all
liabilities due within one month).
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Minimum Authorisation Criteria
(vi) Adequate disclosure of information
o
The Banking (Disclosure) Rules set out the minimum standards for public
disclosures which authorized institutions must make in respect of their
profit and loss, state of affairs and capital requirements.
o
The rules apply to both Hong Kong incorporated institutions (including
those that are subsidiaries of foreign banks) and overseas incorporated
authorized institutions, except for those institutions that fall within the
exemption criteria (basically for small restricted licensed banks and
deposit-taking companies).
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Minimum Authorisation Criteria
(vii) Other criteria include :
o
adequate systems of control for appointment of managers
o
adequate control of large exposure
o
requirement to maintain adequate provisions
o
requirement to maintain adequate accounting systems and adequate
systems of control
o
business to be conducted with integrity, prudence and competence
The HKMA may, by notice served on an authorized institution, attach to its authorization
such conditions as he may think proper.
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Charltons

Charltons’ extensive experience in corporate finance makes us
uniquely qualified to provide a first class legal service

Extensive initial public offering and listing experience

Representative offices in Shanghai, Beijing and Yangon

“Boutique Firm of the Year” awarded to Charltons by Asian Legal
Business for the years 2002, 2003, 2006, 2007, 2008, 2009, 2010,
2011, 2012, 2013 and 2014

“Corporate Finance Law Firm of the Year in Hong Kong” awarded to
Charltons in the Corporate INTL Magazine Global Award 2014

“Hong Kong's Top Independent Law Firm” awarded to Charltons in
the Euromoney Legal Media Group Asia Women in Business Law
Awards 2012 and 2013

“Equity Market Deal of the Year” awarded to Charltons in 2011 by
Asian Legal Business for advising on the AIA IPO
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Charltons

Excellent links and networks with law firms worldwide

Julia Charlton was named a “Leading Lawyer” by Asia Law &
Practice for the years 2002, 2003, 2004, 2005, 2006, 2007, 2008,
2009, 2010, 2011, 2012, 2013 and 2014

“Asian Restructuring Deal of the Year” 2000 awarded to
Charltons by International Financial Law Review for their work
with Guangdong Investment Limited

Finalist for China Law & Practice’s “Deal of the Year (M&A)”
2007 for their work on Zijin Mining Group Co Ltd.’s bid for
Monterrico Metals plc
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Practice Areas

Capital markets

Corporate and commercial

Securities

Mergers and acquisitions

Investment funds: China and offshore

Derivatives

Restructuring

Venture capital

Investment
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Practice Areas

Capital Markets
Global offerings and GDRs
IPOs and Placings
Listing on the Hong Kong, Shanghai, Shenzhen,
London and Luxembourg stock exchanges

Corporate and Commercial
Mergers and Acquisitions
Joint ventures
Stock exchange advisory
Corporate governance
Stock options
Employment law


Securities
Compliance and disclosure
Dealing and advisory authorisations in Hong
Kong and Mainland China
Options
Investment Funds: China and Offshore
Authorised and unauthorised funds
Stock exchange listing (including Hong Kong,
Dublin, London, Cayman, Bermuda stock
exchanges)
Closed-end and open-ended structures
Hedge funds

Mergers and Acquisitions
Hong Kong Code on Takeovers and Mergers
Public offerings
Reverse takeovers
Private acquisitions
Due diligence in China and elsewhere in Asia

Derivatives
Structuring listed and unlisted derivatives
Placings on Hong Kong and Luxembourg listed
warrants and other structured products
Compliance and regulatory

Restructuring
Schemes of arrangement
Workouts
Corporate recovery
Asset injections

Investment
China investment regulations
Structuring a major foreign direct investment projects
Evaluation and due diligence

Private Equity and Venture Capital
Optimum PRC and offshore structures
Preferred stock financing
PRC regulations
Exit Strategies
14
The Charltons Team
The team is composed of individuals with the following knowledge and skills:

A detailed knowledge of Hong Kong law and practice in relation to securities and
licensed corporations.

Extensive experience of providing legal services for Hong Kong and overseas clients,
including corporate banks and licensed corporations.

Extensive experience of communicating with the Securities and Futures Commission
(SFC) including arranging and attending with the SFC for new applicants.

In depth knowledge of the relevant securities law, and relevant rules, codes and
guidelines issued by the SFC from time to time.
15
Team Profile: Julia Charlton
Julia Charlton – Partner

Julia, LL.B (1st class Honours), A.K.C (Kings College,
London) was admitted as a solicitor in England & Wales
in 1985 and has practised as a solicitor in Hong Kong
since 1987.

Julia is a member of the Listing Committee of the Stock
Exchange of Hong Kong Limited and the Takeovers Panel
and the Takeovers Appeal Panel of the SFC.

Julia was named a “Leading Lawyer” by Asia Law &
Practice for the years 2002, 2003, 2004, 2005, 2006,
2007, 2008, 2009, 2010, 2011, 2012, 2013 and 2014.

Julia was named a “Leading Advisor” by Acquisition
International for 2013.

Julia was also named the “Capital Markets Lawyer of
the Year – Hong Kong” in the Finance Monthly Global
Awards 2014.

Julia has extensive experience in China work and is a
Mandarin speaker.
16
Contact Us
Hong Kong Office
Dominion Centre
12th Floor
43 – 59 Queen’s Road East
Hong Kong
Telephone:
Fax:
Email:
Website:
(852) 2905 7888
(852) 2854 9596
enquiries@charltonslaw.com
http://www.charltonslaw.com
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Our Locations
China
In association with:-
Beijing Representative Office
Shanghai Representative Office
3-1703, Vantone Centre
A6# Chaowai Avenue
Chaoyang District
Beijing
People's Republic of China
100020
Room 2006, 20th Floor
Fortune Times
1438 North Shanxi Road
Shanghai
People's Republic of China
200060
Telephone: (86) 10 5907 3299
Facsimile: (86) 10 5907 3299
enquiries.beijing@charltonslaw.com
Telephone: (86) 21 6277 9899
Facsimile: (86) 21 6277 7899
enquiries.shanghai@charltonslaw.com
Networked with:-
Myanmar
Yangon Office of Charltons Legal Consulting Ltd
161, 50th Street
Yangon
Myanmar
enquiries.myanmar@charltonslaw.com
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