Hong Kong cuts down a third of virtual banking applicants

They failed to submit sufficient information on authorisation criteria.

About a third or 10 of the roughly 30 applications received by the Hong Kong Monetary Authority (HKMA) in its first batch of virtual banking applications will not be processed anymore.

Also read: Are Hong Kong lenders under threat as virtual banks zero in on their market?

The applicants who aim to provide the full suite of retail banking services without the need to set up branches, failed to submit sufficient information on certain critical aspects of authorisation criteria, the de-facto central bank said in a statement.

Virtual bank applicants are required to meet the same level of minimum paid-up capital requirements of $300m that their retail counterparts must satisfy along with an exit plan that will enable them to gracefully unwind their business in the event that they shut down operations.

Of the remaining applications, a third will be shortlisted by the HKMA for the next stage of assessment. “This batch of applicants should be more promising or better-equipped than others in terms of their business models, technology platforms and financial capability, etc., rendering them better positioned to meet the policy objectives of the HKMA in introducing virtual banking,” the de-facto central bank said in a statement.

Confirmed applicants include Standard Chartered Bank, online lending platform WeLab, a consortium led by CASH Financial Services Group, Zhong An Bank allied with China Citic Bank and HKT, a joint venture by Bank of East Asia, Airwallex and Sequoia Capital China.

Also read: Standard Chartered sets up new entity to support virtual bank ambitions

The HKMA aims to grant virtual bank licenses in Q1 2019 although it does not set any specific number. The authorisation of virtual bank entities is part of Hong Kong’s seven-point Smart Banking agenda that includes the formulation of a policy framework on open APIs; a real-time payment system that went live in September and enhancing the fintech supervisory sandbox.