When it comes to managing your finances in Hong Kong, choosing the right bank account is a crucial decision. The diverse range of banking options available in this global financial hub can be overwhelming. In this guide, we will explore the different types of bank accounts you can open in Hong Kong, helping you make an informed choice about your financial future
4 Primary types of account open in bank
Bank accounts provide ease of access, a sense of financial security, and protection for your funds. Whether entrepreneurs opt for online banking or prefer the traditional services of a bank or credit union, you have a multitude of account options at your disposal.
Various bank account types fulfill distinct purposes based on your requirements. Some are tailored for everyday spending or bill payments, while others are crafted for either short-term or long-term saving goals. The most prevalent types of bank account open in bank categories encompass:
- Checking accounts
- Savings accounts
- Money market accounts (MMAs)
- Certificate of deposit accounts (CDs)
By comprehending how these diverse bank account options differ, you can more easily determine the best place to safeguard and manage your finances.
Checking accounts
A checking account is a deposit account that you can establish at a physical bank branch, credit union, or internet-based bank. Additionally, certain financial institutions outside of traditional banks may extend the option of opening checking accounts to their clientele.
A typical checking account is the most common choice. It allows debit card spending, online bill payments, fund transfers between linked accounts, but may have a monthly fee or require a minimum balance to avoid fees.
Saving accounts
A savings account is a deposit account designed for holding money you do not intend to use immediately. While most savings accounts offer interest on deposited funds, it’s worth noting that the interest rate and annual percentage yield (APY) may differ considerably between different banks.
Here is a benefit of checking accounts: Savings accounts are ideal for individuals looking to set aside money for emergencies, short-term goals, or simply to earn a modest interest on their balances.
Money market accounts (MMAs)
Money market accounts (MMAs) blend elements from both savings accounts and checking accounts, creating a unified deposit account. Generally, a money market account permits you to accrue interest on your balance while also providing the convenience of check-writing and debit card access for expenditures or settling bills.
Money market accounts are suitable for individuals who want to earn a higher interest rate while maintaining some degree of liquidity and accessibility to their funds.
Certificate of deposit accounts (CDs)
Certificates of deposit (CDs) are categorized as time deposit accounts. When you initiate a conventional CD account, it implies your commitment to keep your savings intact for a predetermined duration, known as the maturity term. Throughout this duration, you’ll accumulate interest on your deposited funds.
For those who want to earn a higher interest rate on their savings and are committed to leaving their money untouched for a predetermined period, CD accounts represent an excellent option.
Types of bank accounts you should have in Hong Kong at the glance
Types of bank accounts systems you should have in Hong Kong operate on a three-tier structure, consisting of Licensed banks, Restricted banks, and Deposit-taking companies. This article explores the unique characteristics of each category and their operational dynamics.
The banking sector holds immense significance in Hong Kong’s economic development. The city not only excels in offshore banking but also boasts strong links with offshore renminbi business in Mainland China, attracting considerable attention from global investors.
Hong Kong is globally recognized as a financial hub, housing over 70 of the world’s top 100 banks. Its concentration of international banks positions it among the top ten global banking centers in terms of external transaction volume.
The Hong Kong Monetary Authority (HKMA) serves as the regulatory body for Hong Kong’s banking system, overseeing four primary categories of banks:
- Licensed banks
- Restricted license banks
- Deposit-taking companies
- Foreign bank offices (representative offices of foreign banks)
The banking landscape in Hong Kong operates on a three-tier system, categorized based on deposit amounts, deposit terms, and business nature. These categories are collectively referred to as Authorized Institutions (AIs) under the Banking Ordinance.
As of HKMA’s latest update in April 2020, Hong Kong boasted a total of 193 authorized institutions, comprising 163 licensed banks, 17 restricted banks, and 13 deposit-taking companies. Additionally, the jurisdiction included 42 local representative offices of overseas banks, 8 locally incorporated companies licensed for virtual bank operations, and 30 money broker approvals granted by the HKMA.
It is important to note that each category of institutions has specific requirements and constraints. Furthermore, we consider only licensed banks and restricted banks as traditional banks. Below, we delve into the defining characteristics of Hong Kong’s three-tier banking system.
Difference between types of bank accounts in Hong Kong
After providing an overview of the four main types of bank accounts in Hong Kong, this section will delve deeper into the difference between types of bank accounts in Hong Kong within the context of the city’s three-tier banking system.
Hong Kong’s three-tier banking system is a cornerstone of its financial sector, offering diversity and effective regulation to meet a wide range of financial requirements. Below, we will explore the key characteristics of each account type in more detail.
Licensed banks:
- Can engage in a wide range of “banking business” activities as defined in the Banking Ordinance, encompassing deposit-taking, provision of various account types, lending, and check processing.
- Authorized to accept deposits of any size and duration from the public.
- Minimum capital requirement is HK$300 million, significantly higher than that of the other two categories.
- May be incorporated either within or outside Hong Kong.
- Virtual banks are permitted in Hong Kong and fall under the licensed bank category.
Restricted license banks:
- Primarily involved in capital market and merchant banking activities.
- Accept deposits of HK$500,000 and above, with an original maturity term of no more than 3 months.
- Minimum capital requirement is HK$100 million.
- You can incorporate it either within or outside Hong Kong.
Deposit-taking companies:
- Not classified as conventional banks but can participate in specialized activities, including consumer finance, commercial lending, and securities-related business activities.
- Accept deposits of HK$100,000 or more, with an original maturity term exceeding 3 months.
- Minimum capital requirement is HK$25 million.
- You must incorporate it within Hong Kong.
These tiers collectively bolster the strength, stability, and international connectivity of Hong Kong’s banking sector. Each tier fulfills distinct roles within the city’s financial landscape.
In addition to the tier system, authorized institutions in Hong Kong must satisfy minimum criteria for authorization, as stipulated in the Seventh Schedule to the Banking Ordinance. These criteria encompass minimum capital requirements, the suitability of relevant individuals, adequacy of internal control and accounting systems, information disclosure, financial stability, and the integrity, prudence, and competence of the institution’s business.
The Deposit Protection Scheme (DPS), introduced in 2006, safeguards deposits held by licensed banks in Hong Kong. The DPS automatically covers deposits eligible for protection, providing compensation in the event of bank failure. Depositors, both individuals and companies, can receive compensation of up to HK$500,000.
Conclusion
In conclusion, Hong Kong’s banking system, structured with a three-tier framework, plays a pivotal role in the city’s economic development and global financial connectivity. It offers a diverse array of banking services tailored to various financial needs while adhering to stringent regulatory standards.
