Account Opening Troubles Mainly Caused by a Few Large Hong Kong Banks, says Official

Problems relating to the opening of bank accounts for start-ups and small- and medium-sized companies in Hong Kong are mostly confined to one or two of Hong Kong's largest banks, a government official said. James Lau, the Acting Secretary for Financial Services and the Treasury, said instead of being an industry-wide phenomenon, the issue of enterprises encountering difficulties in opening bank accounts was only pertinent among a few banks.

"It happens that these banks are usually the first port of call for many local and overseas companies seeking to open bank accounts, thereby causing the problem to appear more widespread than it is," he said. 

Responding to a question in the Legislative Council last week, Lau said the Hong Kong Monetary Authority ("HKMA") required banks to adopt a risk-based approach to handle applications for opening bank accounts and to reasonably differentiate the risks involved. 

The rise in complaints over account opening problems for start-ups coincided with the territory's push last year to establish itself as a hub for financial technology companies – many of them start-ups – in the region. 

The HKMA earlier this year issued a number of circulars and updates to the industry, urging banks to ensure they do their part for financial inclusion. 

Lau said the regulator's efforts have begun to have some effect, with some banks having taken steps to improve the account opening process by shortening the processing time, providing interim updates about the progress of applications and establishing review mechanisms for unsuccessful applications.

Lau also said the HKMA plans to commission mystery shopping exercises in a few months' time to monitor the effectiveness of measures adopted by banks. 

"The HKMA is also working with the industry association and international standard-setting bodies to explore ways to reduce the burden of banks in conducting CDD, by making use of innovation and technology such as know-your-customer utilities," he said. 

"The Hong Kong Association of Banks is also contemplating measures to encourage the banking industry to reach out to SMEs and provide them with up-to-date information on banking services, through existing SME support and enquiry platforms operated by the government."

Generally speaking, he said the regulatory requirements in Hong Kong were in line with international standards. 

"The HKMA gathers from banks with business arms operating in other jurisdictions that the bank account opening processes and requirements in Hong Kong are broadly comparable to those adopted by other international financial centres," Lau said.

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North Asia editor for Thomson Reuters Regulatory Intelligence. He is based in Hong Kong.