The Hong Kong Monetary Authority (HKMA) has renewed Guideline on Authorization of Virtual Banks after conducting public consultation.

During the public consultation period, 25 respondents filed their submissions and all of them supported the introduction of virtual banking in Hong Kong.

Majority of the respondents supported to bring the virtual banking system under the same supervisory regulations applicable to conventional banks.

The respondents were also not against the proposal to allow financial and non-financial firms to operate a virtual bank in Hong Kong.

HKMA also received specific responses on multiple principles of the guideline where most of the respondents recommended that the virtual banks should play a role to improve financial inclusion. Some of them also said that the virtual banks should not have minimum balance requirements or impose low-balance fees on customers.

The monetary authority agreed in principle to these suggestions.

Furthermore, few respondents were against the guideline that requires the virtual bank applicants to provide an exit plan, which HKMA advocates as necessary that will ensure orderly closure of business operations by the respective entity.

They also requested to reduce the minimum paid-up capital requirement of HK$300m, which was rejected by HKMA.

HKMA chief executive Norman Chan said: “We are pleased to have broad support received during the public consultation for the development of virtual banking.

“Interested parties are beginning to submit applications to the HKMA.  We will evaluate the applications carefully and expeditiously, applying the principles set out in the revised Guideline.

“We hope to be in a position to start granting licences to virtual banks towards the end of this year or in the first quarter of next year.”