In light of the evolution of the banking sector and the changing domestic and international regulatory and supervisory landscape, the HKMA has recently proposed reforms of the law in relation to banking regulations and supervision in Hong Kong, with a focus on the following two areas:
(i) establishment of a statutory regime for the exercise of direct regulatory and supervisory powers by the HKMA over the designated locally incorporated holding companies of locally incorporated AIs; and
(ii) flexibility for the HKMA to appoint skilled person(s) on a case-by-case basis, with a view to facilitating the performance of its functions under the BO.
Establishment of a statutory regime
A group-wide approach is currently adopted by the HKMA in relation to the supervision of locally incorporated AIs. The HKMA considers the consolidated risks of an AI’s banking group (including its downstream operations), and the risks presented by other group companies (including financial or non-financial) when carrying out his supervisory duties. Nonetheless, the HKMA does not have direct regulatory or supervisory powers over holding companies of AIs under the BO. Consequently, the HKMA can currently only rely on powers to require the “fitness and propriety” of a controller of an AI on a continuing basis for supervision and regulatory purposes.
With the establishment of the proposed statutory regime mentioned in (i) above, the HKMA will be able to exercise direct regulatory and supervisory powers over designated locally incorporated holding companies of locally incorporated AIs.
Flexibility to appoint skilled persons
At present, the HKMA is not explicitly entitled to engage anyone (other than his own staff authorised by him) to assist in the performance of his functions under the BO. Owing to the growing complexity and technicality of AIs’ operations caused by factors such as digitalisation and adoption of fintech, the HKMA has come to the conclusion that it is necessary to appoint skilled persons with the relevant and appropriate skill sets and resources, in order to assist him in the performance of his functions under the BO.
The HKMA initiated a public consultation on the above proposed enhancements and a number of technical amendments to the BO on 5 December 2024. Please click here for the consultation paper issued by the HKMA.
