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The History of Hong Kong’s Banks

Being one of the largest representatives of international banks, Hong Kong recorded a presence of approximately 70 out of the 100 largest banks all over the world. This city has been crowned as the world’s 9th largest international banking center.

As per the 2019 banking sector report, Hong Kong has 164 licensed banks, 17 licensed restricted banks, and 13 deposit-taking companies, constituting a total of 194 authorized institutions. Moreover, there are 42 local representative offices of foreign banks in HK.

This article will help you get insightful information about HK banks’ history and the benefits of newly introduced virtual banks for Hong Kong businesses.

History of Hong Kong Banks

In the 1840s, when Britain took over Hong Kong from China, Hong Kong businesses were mainly controlled by elite trading houses such as Jardine Matheson, Gibb Livingstone, and Dent & Co. The ownership of these trading houses led to dissatisfaction with the oligopoly experienced by their counterparts.

This condition urged the development of the banking industry in Hong Kong. With several British investors’ help, the first locally-based bank was established in 1864- the Hongkong and Shanghai Banking Corporation (HSBC). From then on, HSBC has been named the principal bank in Hong Kong and carries about half of HK’s total banking transactions.

Development of Hong Kong banking industry

With the introduction of the first local banks, HSBC, Hong Kong banking services experienced a spark in their banking transactions. In order to maintain that spark, the first Banking Ordinance was passed in 1948 to stipulate the legal framework for the regulation, licensing, and registration of the banks.

Afterwards, the development of the banking industry accelerated. Many workers moved to HK, which further led to an increase in the city-state’s industrial base and population size. The banking services demand grew and local banks gained traction due to increased business opportunities. There were already 87 licensed banks operating in Hong Kong by 1962.

However, the rapid increase in the number of licensed banks also gave birth to numerous issues. Local banks started offering higher interest rates and opening new branches to attract more deposits. In fact, they also extended their loans to the stock market’s investors and real estate without screening the applications carefully, which leads to negative liquidity.

This leads to panic among bank officers and leads to the closing down of many banks. In fact, Hang Seng Bank also faced the same situation even though it was financially sound and strong. However, this crisis was resolved when HSBC acquired a major proportion in Hang Seng Bank and provided adequate liquidity for the depositors’ withdrawals. Since then, many smaller local banks have sought capital injections from foreign banks.

Hong Kong Banks

Anyone considering the future in this city should be aware of Hong Kong banks and some history of popular banks. It will help them to select the best corporate bank as per their business requirements and needs. Every bank has its own history and policy. The section below will explain more about a few popular banks in Hong Kong, namely The Hongkong and Shanghai Banking Corporation Limited, Standard Chartered Bank (Hong Kong) Limited, and the Bank of China (Hong Kong) Limited, all of which are able to issue Hong Kong dollar notes.

History of Some Popular Banks in Hong Kong

In 1935, China’s government passed the Currency Ordinance, which took Hong Kong and China dollars off the silver standard. In fact, it also switched the notes to be backed by pounds sterling. The new system also forced banks to turn in their solver and issue the certificate of indebtedness. All these actions help the government avoid the economy’s fluctuations and in case of an emergency.

Due to the banking systems’ stability, the region’s history, banking, and currency have remained much the same since the 1800s. Long-lasting banks issuing their own currency made Hong Kong’s currency unique.

The Hongkong and Shanghai Banking Company Limited (now The Hongkong and Shanghai Banking Corporation Limited)

The Hong Kong Shanghai Banking Company Limited, or HSBC, was created in 1860 by a Scot named Thomas Sutherland. The conservative practices of the Scottish foundation helped this bank exist for more than 150 years.

This bank’s stability helped to become the primary bank for the government of Hong Kong. Due to this bank’s control and stability over China’s debt, the Hong Kong and Shanghai Banking Co. virtually set China’s foreign exchange rate. In fact, over the 20th century, HSBC acquired banks along the way and eventually formed the HSBC holdings group, the 7th largest bank globally.

The Bank of China

The Bank of China is now known as Bank of China (Hong Kong) Limited. This bank was formed in 1912 with the Republic of China’s introduction, making it the first-owned bank in China.

Though the Bank of China was able to open a HK branch within a short period, China didn’t issue notes until much later. This bank was not a primary bank in Hong Kong, until 1990, as China made its transition away from British control in 1977.

As China gained its rights in Hong Kong, it wanted to have a smooth transition in order to avoid the unrest and severe economic repercussions. China had also set up note-issuing privilege for Hong Kong, through the Bank of China in 1994. Now it is the second-largest commercial banking group in Hong Kong.

Banking in Hong Kong

Hong Kong has been nominated as one of the top financial centers in the world. In fact, it is also crowned with the title of having the highest number of banking facilities and institutions globally.

Around 70 banks have a presence in Hong Kong out of the largest 100 banks in the world. All the major banks in Hong Kong have created services and products that match every business founder’s international and local corporate needs.

Hong Kong Banking System – Overview

Hong Kong follows stringent rules and procedures to open up a bank account. Therefore, before selecting the bank for your business, you should be aware of your banking needs. Afterall, it should match those demands with what each bank offers.

Hong Kong has 164 license banks, 17 restricted license banks, and 13 deposit-taking companies which makes the HK banking system more reliable and robust. In fact, there are 42 local representative offices of foreign banks available in Hong Kong. Normally, the Hong Kong banking system follows the three-tier system that you should be aware of before embarking into the HK business market.

  • Licensed Banks – Licensed banks in Hong Kong offer companies and individuals the facility to open current and saving accounts. These banks don’t impose any restrictions on the acceptance of deposited value. Examples are large established banks such as HSBC, Hang Seng Bank, DBS Bank, and others.
  • Deposit-taking Banks – These banks generally correspond to deposit-taking companies. Deposit-taking banks generally deposit at least HK$100,000, with an original maturity term of at least three months. Examples are Public Finance Limited, Fubon Credit (Hong Kong) Limited, BCOM Finance (Hong Kong) Limited, and others.
  • Banks with Restricted License – These banks are engaged with capital market activities and merchant banking. The restricted license bank accepts deposits with maturities of at least HK$500,000. Examples are Allied Banking Corporation (Hong Kong) Limited, Bank of America Securities Asia Limited, Citicorp International Limited, Goldman Sachs Asia Bank Limited, J.P. Morgan Securities (Asia Pacific) Limited, and others.

First bank in Hong Kong – Oriental Bank Corporation

Oriental Bank Corporation was the first bank to be formed in Hong Kong. In fact, it was nominated as the first non-issuing bank in Hong Kong. Under the name of Bank of Western India, Oriental Bank corporation was established in 1842 in Bombay.

However, in 1845, the bank shifted to London and changed its name to Oriental Bank Corporation. In the same year, this bank opened a branch in Hong Kong. It has since become one of the largest exchange banks in Asia. It succeeded in 1851 in getting chartered that allowed competition with the East India Company’s opium billing monopoly that was unpopular in the U.K. during that time.

Hong Kong Monetary Authority (HKMA)

There were no central banks in Hong Kong before 1993. All the central bank functions were handled by leading commercial banks such as the Hong Kong and Shanghai Banking Corporation (HSBC) and government agencies. Only two legal tender banks issued notes in Hong Kong: HSBC and Standard Chartered Bank.

However, in 1995, the Bank of China also received the right to issue Hong Kong notes. During that time, HSBC was principal bank to the government and management for clearing houses.

In order to manage uncertainties in the economy, the Monetary Affairs Branch of Hong Kong was formulated by the monetary policy. This authority was tasked to manage Hong Kong’s foreign reserve, in short, the Exchange Fund.

About HKMA

The HKMA (Hong Kong Monetary Authority) was established in 1993 by merging the Commissioner’s Office for Banking with the Office of the Exchange Fund. The HKMA is the central bank in Hong Kong. The primary objective of the HKMA is to maintain the stability of the currency in Hong Kong. Earlier, it was quite difficult for the banks to manage the currency’s liquidity, but in 1992, the Exchange Fund Ordinance 1992 gave birth to the HKMA.

In fact, the HKMA has informed banks of money laundering as they gear up to offer yuan-denominated banking services. The HKMA also ordered banks to record whether yuan deposits were in cash or via the conversion of other currencies to reduce the possibility of money laundering activity. The HKMA also urged financial institutions to keep track of multiple accounts opened by the same customers to ensure the day exchange limit.

Responsibilities of HKMA

Below are the responsibilities of HKMA that you should be aware of:

  • With the sound system of the Exchange Fund, monetary policy operations and other means maintain currency stability within the framework of the linked exchange rate system.
  • Promote integrity, development of the financial system, and efficiency, particularly payment and settlement arrangements.
  • Through the regulation of the banking business and the supervision of authorized institutions and the business of taking deposits, ensure the banking system’s safety and stability.

Hong Kong Banking Trends

With the introduction of digitization and online banking, most companies have transformed their banking solutions from traditional brick and mortar banks towards online banking. Effective internet services have evolved towards online banking services and making many companies’ banking experience more comfortable than ever.

Virtual Banking & its benefits

A new type of self-service in mobile banking and direct ”at the window” service, virtual banking is a new Hong Kong banking system trend. It is an excellent medium to connect with clients through audio, chat, and video channels. Clients and virtual banks can communicate using smartphones or tablets without any issue.

It allows uninterrupted access to bank representatives anytime, anywhere. Besides these benefits, virtual banking can also act as an information booth, transaction terminal, and multi-functional bank. After all, its main purpose is to deliver seamless retail banking services via different forms of electronic channels instead of physical branches such as the internet.

Benefits of Virtual Banks

Below are the few benefits of virtual banking that you should know:

  • Instant Global payments – Virtual banks business founder to transfer money, pay, and accept payment internationally. With a few clicks, you can immediately send money to any country.
  • Greater Flexibility – Virtual banks offer customized services and products that match the customers’ needs and issues. Virtual banking services are 24*7 available, and all the transactions are designed to be online via a mobile device.
  • Hassle-free transactions – A secure payment process for safe and easy small business transactions. You can check the balance and transactional record via a mobile application, which makes the whole process hassle-free.


This article provides insightful information about the Hong Kong banking industry’s history and how it developed over time. If you want to set up a business in Hong Kong and curious to know which bank would match your business requirements, Startupr can help you.

Startupr is one of the leading business incorporation and company secretary service providers in Hong Kong. We’ve helped thousands of companies start their business and open bank accounts for their business. For more information, contact us today!