The Panel of Financial Affairs of the Legislative Council convened on 4 May 2026 to discuss, among other items, proposed amendments to banking-related legislation. Based on an ongoing review conducted by the HKMA, a range of amendments were proposed to reflect and align Hong Kong’s banking regulation regime with the latest banking practices, international regulation and regulatory approaches and to address specific issues identified by the HKMA during his review.
These May 2026 proposed legislative amendments also aligned closely with the consultation conclusions released by the HKMA in February earlier this year (view the article here), which gathered industry feedback on similar topics.
Key legislative amendments to the BO proposed by the HKMA include:
- Simplifying to a two-tier system: The HKMA will be looking to simplify the regulatory structure of the banking system by merging the deposit-taking company tier into the restricted licence bank tier. Existing deposit-taking companies will be given a five-year transitional period either to become a restricted licence bank or wind down their deposit-taking operations.
- Introducing further provisions in respect of bank holding companies: The HKMA will be looking to introduce a framework to increase direct regulatory oversight over companies designated as designated bank holding companies. The HKMA will be empowered to impose prudential requirements and restrictions on a case-by-case basis better to manage risk, but does not expect that implementation of this proposed framework will impose any additional material regulatory burden because relevant companies which fall under the new designation are in effect already subject to similar, existing requirements given their status as controllers of AIs.
- Enhanced enforcement powers: The proposed amendments will further enhance the HKMA’s existing enforcement powers by introducing intermediate disciplinary powers, including the ability to issue reprimands, prohibit certain persons from acting as officers of an AI and impose pecuniary penalties.
- Engaging skilled persons: To cope with increasing complexity of operations of AIs following the adoption of fintech and general digitalisation, the proposed amendments will allow the HKMA to appoint, or require that an AI appoints, an external skilled person to assist in the exercise of the HKMA’s functions where needed.
Apart from the above, the HKMA plans to introduce a number of technical amendments to the BO, as well as amendments to the FIRO and HKABO.
The full paper prepared by the Financial Services and the Treasury Bureau of the HKMA and presented to the Legislative Council can be accessed here. The Government intends to introduce the proposed amendment bills reflecting the above to the Legislative Council within the first half of 2026.
