But account opening has become stricter, and behind the gradual recovery of Hong Kong bank deposits: queuing up in the morning to open the door

In the bustling streets of Tsim Sha Tsui, Kowloon, Hong Kong, every morning from 8:30 to 9:00, there is a long queue in front of the door of Bank of China Hong Kong, where citizens or tourists queue up to wait for the bank to open, becoming a major sight on the street.

According to data from the Hong Kong Monetary Authority, deposits in the Hong Kong dollar, Chinese yuan, and US dollar in the banking system have gradually increased since the beginning of this year, with year-on-year growth of 0.6%, 5.6%, and 0.8% as of July. The account managers of several Hong Kong banks, including Standard Chartered Hong Kong and Bank of China Hong Kong, recently told First Financial reporters that the number of accounts opened in Hong Kong has been increasing since the beginning of the year, which is related to the increase in commercial activities in Hong Kong and mainland China after customs clearance. "But recently, the inquiry time has become longer, and there are signs of stricter account opening requirements, with an increase in the number of account cancellations," said a customer manager.

"For mainland tourists who have no job, study or other needs and only want to open an account for financial management, they may not be able to successfully open an account in some banks or the account opening process may be delayed," the account manager of Bank of China Hong Kong told reporters.

Currently, the divergence of monetary policies between China and the United States has led to an expansion of the interest rate gap between Hong Kong and the mainland. The Federal Reserve has raised interest rates to the range of 5.25% to 5.5%, and the Hong Kong dollar has implemented a pegged exchange rate system to the US dollar. The Hong Kong Monetary Authority has also been continuously following the Federal Reserve in raising interest rates. In terms of bank fixed deposits in Hong Kong, the annualized interest rate for offshore RMB deposits is 2%, while USD deposits are over 4%, and Hong Kong dollar deposits are generally above 3.5%.

Hong Kong banking professionals remind that some risk or "demonstration" factors need to be taken into account, including some banks that attract customers with high interest rates, such as short-term annualized interest rates of 7% or even 9%, but most of these high interest rates only have a one week deposit term. There are also some "marathon high interest current deposits" with interest rates increasing at each stage, but the annualized average interest rate is mostly lower than domestic USD deposits; In addition, if the account is used as a transfer account or kept in a "sleep state", it is easy to close the account.

Hong Kong deposits are steadily increasing, and the popularity of account opening is not decreasing

At present, if you open the appointment procedure of BOC Hong Kong WeChat official account, it is not difficult to find that the time for making an appointment to open an account has become longer and longer. From the early days, you can make an appointment a week in advance to now, it needs to be 1 to 2 months in advance. Some banks in popular business circles even have no reservation.

In addition, in addition to deposit and financial needs, many mainland tourists also buy insurance to open accounts in Hong Kong. For example, for general dividend life insurance in mainland China, the compound annualized interest rate is below 3.5%, while in Hong Kong, the USD denominated dividend insurance is still above 5%, and the policyholder, beneficiary, and currency can be changed.

"There are also many people coming from mainland China to work in Hong Kong this year, which has driven the demand for account opening and savings," a customer manager at Standard Chartered Hong Kong told reporters.

According to the latest data released by the Hong Kong Monetary Authority as of July, the total amount of deposits in the Hong Kong banking system is HKD 15.6 trillion, steadily increasing since 2022. In contrast, the total amount of deposits in 2021 showed a significant downward trend; Hong Kong's deposits in the Hong Kong dollar, Chinese yuan, and US dollar have continued to rise this year, with year-on-year growth of 0.6%, 5.6%, and 0.8% as of July.

During a speech in September, the President of the Hong Kong Monetary Authority, Yu Wai man, stated that despite the challenges facing the financial market, the Hong Kong banking system has also performed well. The capital and liquidity situation of the banking industry remains strong, providing a solid buffer for banks to withstand shocks. As of the end of June 2023, the total capital ratio of locally established banks is close to 21%, far higher than the international minimum requirement of 8%. The average liquidity coverage of major banks reached 170% in the second quarter of 2023, far exceeding the statutory minimum requirement of 100%. In addition, the total deposit level of the Hong Kong banking system has remained stable, increasing by 1.4% in the first seven months of 2023.

"After Hong Kong's customs clearance, based on transportation data, the number of tourists visiting Hong Kong recently has returned to its peak in 2019. Many people have indeed opened accounts in Hong Kong, including activating their Hong Kong ID cards, and banks are also very active." Xia Chun, Dean of the Financial Research Institute of Bank of China Holdings, who previously taught at the University of Hong Kong, told reporters earlier.

On September 6th, Standard Chartered announced that in order to facilitate the continuously increasing weekend financial demand of customers in the Greater Bay Area, Standard Chartered Bank's Shenzhen Zhuoyue Branch will start providing services on weekends from September 9th. The operating hours are from 10am to 4pm on Saturdays and Sundays, providing customers with account opening and cross-border wealth management consultation services. At the same time, Standard Chartered Bank's Tai Wai Branch, which opened in July this year, will also operate for 7 days a week starting from September 9th. Services will be provided from 9am to 5pm on Saturdays and from 12pm to 5pm on Sundays.

High interest rates or exaggeration, stricter requirements for account opening

However, due to the continuous increase in the number of account openings since the beginning of the year, according to reporters, some accounts with money laundering risks have been closed, and bank personnel have also indicated an increase in the number of closed accounts. Meanwhile, if the depositor uses the account as a transfer account, it is also easy to close the account.

"Previously, mainland customers could open an account as long as they came, without any deposit amount requirements or other attached conditions. However, due to the large number of account opening personnel, it is now necessary to carefully understand the customer's account opening purpose and work situation," the account manager of Bank of China Hong Kong told reporters.

Ms. Zhang, who went to Hong Kong in early September, told reporters, "Students, Hong Kong residents, and clients with work visas can quickly open accounts successfully, but for mainland tourists like me, the opening time is much longer."

She said that the account manager will inquire about the purpose of opening an account, such as whether it is for financial investment or buying insurance. If it is the former, relevant investment records and experience proof in Hong Kong need to be submitted. By contrast, at the beginning of the year, many customers only needed to bring their ID card and Hong Kong and Macao travel permit to quickly open an account.

In addition, if opening an account in Hong Kong solely for the purpose of high interest rate deposits, attention should be paid to the risk of high interest rates being exaggerated. According to a journalist from First Financial, currently, most banks do not offer high interest rates for US dollar deposits, while large banks offer lower rates, generally around 4% and some only 3.8%, while the annualized interest rates for US dollar deposits in small and medium-sized banks range from 4.5% to 4.8%.

Some banks also offer customers USD fixed deposits with interest rates ranging from 9% to 10%, but the high interest deposit period is only one month, and there are also banks with high interest deposit periods of only one week, mainly used to attract depositors; Other banks offer high interest current deposits with a tiered starting rate of 2% and an annualized interest rate of up to 6% in the final stage, with interest rates increasing in each stage. For example, the first stage interest rate for Hong Kong dollar deposits is 2%, followed by the second and third stages with interest rates of 5.2% and 6%, respectively. But if we calculate the interest rates for these three stages on average, the actual level is not high.

It is worth mentioning that the Federal Reserve's interest rate hike is nearing its end, and some institutions expect the possibility of a rate hike in November. However, most institutions expect the rate hike cycle to have ended, and deposit rates in the US dollar and Hong Kong dollar may also fall in the future.

"The US economy is indeed very resilient, especially in the labor market, but the labor market is a cyclical lag indicator. When we observe more forward-looking indicators, such as the timing of the yield curve inversion and the degree of tightening credit conditions, we believe that the US economic growth will experience a significant slowdown in the fourth quarter of this year." Su Bowen, head of global macro research at Nomura, recently told First Financial reporters.

He believes that as the US economy significantly slows down and inflation gradually decreases, the Federal Reserve will no longer continue to raise interest rates. "We believe that the Federal Reserve will continue to maintain relatively high interest rates and adopt a wait-and-see attitude in the coming period. Over time, the Fed will only take rate cuts when inflation continues to decline. We expect the first rate cut to be after March 2024."