WORLD TRADE  
ORGANIZATION  S/C/N/316 
28 January 2005 
 
 (05-0350) 
Council for Trade in Services Original:   English 
  
 
NOTIFICATION PURSUANT TO ARTICLE III:3 OF THE 
GENERAL AGREEMENT ON TRADE IN SERVICES 
 
  The following notification, dated 26 January 2005,  from the delegation of Hong Kong, China, 
is being circulated to the Members of the Council for Trade in Services. 
 
_______________ 
 
 
 
1. Member notifying: 
Hong Kong, China 
 
2. Notification under: 
Article III, paragraph 3 of the General Agreement on Trade in Services 
 
3. Date of entry into force:  
(a) The Banking Ordinance (Amendment of Seventh Schedule) Notice 2002 came into 
force on 10 May 2002. 
 
(b) The Rules on Interest Rates issued under The Hong Kong Association of Banks 
Ordinance were repealed on 3 July 2001.  
 (c) The one-building condition was complete ly removed by the Hong Kong Monetary 
Authority (“HKMA”) on 30 November 2001. 
 
 Duration:  
 
 Indefinite    
 
4. Agency responsible for implementation  and enforcement of the measure: 
Hong Kong Monetary Authority 
 
5. Description of the measure indicating the modes of supply covered, the effect on trade in 
services (e.g., restrictions/liberalization measur es) and the impact of the measure on 
commitments in the Member’s schedule and Article II (MFN) exemption list, if relevant: 
Mode of supply covered : Commercial presence under Market Access 
 Effect on trade in services : Liberalization measures 
 S/C/N/316 
Page 2  
 
 
Description : 
 
(a) The Banking Ordinance (Amendment of Seventh Schedule) Notice 2002  
The Banking Ordinance (Amendment of Se venth Schedule) Notice 2002, made under 
the Banking Ordinance, gave effect to the relaxation of the market entry criteria for 
the banking sector.  The changes include:  (i) replacing the US$16 billion asset size criterion for overseas-incorporated 
banks applicants by the much lower ba lance sheet size criteria applicable to 
locally incorporated bank applicants , which are currently HK$3 billion for 
customer deposits and HK$4 billion for total assets;  
(ii) reducing the period of operation as a restricted licence bank or deposit-taking 
company from ten to three years and dispensing with the “association with Hong Kong” requirement for locally incorporated applicants seeking to 
upgrade to full licensed bank status; and 
(iii) removing the general requirement that a foreign bank should maintain a local 
representative office in Hong Kong for at least one to two years before it can be considered for authorization.   
 
These changes enable more institutions to  participate in the Hong Kong banking 
sector.  For further information please re fer to the press release issued on 
10 May 2002:  http://www.info.gov.hk/hkma/eng/press/index.htm
 
http://www.info.gov.hk/hkma/eng/press/2002/20020510e4.htm   
 
(b) Deregulation of Interest Rate Rules  
The Rules on Interest Rates (“IRRs”) issu ed by the Hong Kong Association of Banks 
under The Hong Kong Association of Banks Or dinance were removed.  Phase 1 of 
the deregulation covering time deposits with a maturity of less than 7 days took place in July 2000.  The final phase of interest rate deregulation took place in July 2001.  
This involved the removal of the interest rate cap on savings accounts and the 
prohibition of the payment of interest on current accounts.  Following this, interest rates on all kinds of deposits are freely determined by market forces.    The removal of the IRRs helps to prom ote market liberalization and enhance 
competition in the banking sector.  For furt her information please refer to the press 
releases issued on 30 May 2000 and 3 July 2001:  http://www.info.gov.hk/hkma/eng/press/index.htm
 
http://www.info.gov.hk/hkma/eng/press/2000/20000530e6.htm   
http://www.info.gov.hk/hkma/eng/press/2001/20010703e3.htm   
 
(c) Removal of one-building condition  
Foreign banks authorized since 1978 and foreign restricted licence banks authorized 
since 1990 were previously subject to the one-building condition, which restricted 
these institutions to operate from not more th an one building.  Given such factors as  S/C/N/316 
 Page 3 
 
 
advances in technology and the increasing im portance of electronic delivery channels, 
the HKMA believes that this policy has outliv ed its usefulness.  By notices issued 
under the Banking Ordinance, the condition was first relaxed to three buildings in 
September 1999 and was completely re moved in November 2001.     
 This measure has provided foreign institu tions with greater flexibility in doing 
business.  For further information please refer to the press releases issued on 
17 September 1999 and 30 November 2001:  http://www.info.gov.hk/hkma/eng/press/index.htm
 
http://www.info.gov.hk/hkma /eng/press/1999/990917e4.htm   
http://www.info.gov.hk/hkma/eng/press/2001/20011130e3.htm   
 
6. Members specifically affected, if any: 
None 
 
7. The texts are available from: 
The full text of the Banking Ordinance (Ame ndment of Seventh Schedule) Notice 2002 is 
available from: 
 
http://www.gld.gov.hk/cgi-
bin/gld/egazette/gazettefiles.cgi?lang=e& extra=&year=2002&month=05&day=10&vol=06&
no=19&gn=63&header=1&part=1&df=1&nt=s2& acurrentpage=12&agree=1&newfile=1&ga
z_type=ls2   
 
Hong Kong Monetary Authority Telephone: (+852) 2878 8196 Telefax: (+852) 2878 1899 Website: www.hkma.gov.hk
 
E-mail:  hkma@hkma.gov.hk  
 
The above document and the notices giving e ffect to measures (b) and (c) described in 
section 5 are available from the Secretariat a nd Hong Kong, China’s GATS enquiry point. 
 
 
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