The de facto central bank believes they promote fintech and financial inclusion.
The Hong Kong Monetary Authority has expressed a warm welcome to the establishment of virtual banks in Hong Kong with the belief that they can promote fintech and foster financial inclusion as it opens the revised guidelines on virtual bank authorization for public consultation.
The HKMA defines a virtual bank as a bank which provides retail banking services through the internet and other forms of electronic channels.
In a press release, the de-facto central bank affirms that certain guidelines on the authorization of virtual banks, which was first issued in 2000, remain applicable. These include the requirement of a concrete business plan, importance of risk management, fair customer treatment policy and the need to maintain adequate capital levels commensurate to the nature and scale of banking operations.
However, HKMA admits that some refinements may be necessary to the aforementioned guidelines even as it facilitates the establishment of virtual banks amidst the overall industry transition into a new era of Smart Banking.
In light of present day circumstances, necessary updates to the 2000 guideline include the rule prescribing that virtual banks should operate as locally-incorporated bank as well as the guideline prescribing that virtual banks are subject to the same rules and requirements applicable to conventional banks.
The guideline that banks, financial institutions and technology companies can apply to own and operate a virtual bank as well as the requirement of an exit plan is also potentially subject to further amendments.
The public consultation on the revised guideline commences today and the HKMA will release the revised version in May 2018.
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