The guidelines set out the principles that the HKMA will take into account in deciding whether to authorise "virtual banks," which are defined as companies which deliver banking services primarily through the internet or other electronic channels.
A locally incorporated virtual bank cannot be newly established other than through the conversion of an existing locally incorporated authorised institution.
Furthermore, local virtual banks should be at least 50% owned by a well established bank or other supervised financial institutions. For applicants incorporated overseas, they must come from countries with an established regulatory framework for electronic banking.
Mr Y. K. Choi, Acting Deputy Chief Executive of the HKMA, said:
"Essentially, fulfilment of these criteria means that a company applying to set up a virtual bank in Hong Kong must have substance and cannot simply be a 'concept', taking advantage of the popularity of the internet. Although technology risk will be a major factor to be taken into account by a virtual bank, the applicant should attach equal importance to the management of conventional banking risks such as credit, liquidity and interest rate risks."
However, the guidelines do not restrict the rights of Hong Kong citizens to use internet banks located in other countries. Provided deposits are placed overseas, an internet bank does not require authorisation from the HKMA, although certain disclosure requirements will still apply under other rules.
The guidelines are available at the website of the HKMA at http://www.info.gov.hk/hkma.
