Last week, HKMA Deputy Chief Executive, David Carse, announced that in light of the fact that the number of authorised financial institutions setting up operations in the jurisdiction has dropped by around 33% over the past six years, the Monetary Association is drafting plans to slash the minimum asset requirements for foreign banks from US$16 billion to HK$5 billion, in line with domestically incorporated financial service providers.

However, several Hong Kong banks have dismissed fears of a surge in competition, predicting instead that the HKMA's decision will force the Chinese authorities- whose minimum asset requirement for foreign banks is set at US$20 billion- to change their own rules, thus making it easier for Hong Kong based banks to break into the mainland market.

Speaking to the South China Morning Post on Monday, Dan Kwan Kwok-ki, the Senior Vice President of the HK based International Bank of Asia commented that: 'Following China's entry to the World Trade Organisation, some foreign banks have become interested in moving into the China market. The HKMA's timing is right. Relaxing the minimum asset criteria allows foreign banks to set up branches in Hong Kong before moving into China.'

Bernard Charnwut Chan, Executive Director of Asia Commercial Bank supported this point, and argued that although there will probably not be a vast and damaging increase in competition if the HKMA's proposals are adopted, as newcomers are unlikely to enter the retail banking sector, which has traditionally been the backbone of the jurisdiction's finance industry.