Bank of China and the Monetary Authorities of Hong Kong and Macao have announced the Launch of a Cross-boundary Wealth Management Pilot Scheme in the Guangdong-Hong Kong-Macao Greater Bay Area.
The three entities will implement the scheme, “Wealth Management Connect”, to “facilitate cross-boundary investment by individual residents in the Greater Bay Area, according to a joint statement.
Wealth Management Connect refers to the arrangement under which individual residents in the Greater Bay Area (GBA) carry out cross-boundary investment in wealth management products distributed by banks in the GBA. “The scheme has a southbound and a northbound components”, depending on the residency of the investors: residents of the Mainland cities in the GBA can invest in eligible investment products distributed by banks in Hong Kong and Macao by opening designated investment accounts with these banks; residents of Hong Kong and Macao can invest in eligible wealth management products distributed by Mainland banks in the GBA by opening designated investment accounts with these banks.
“Wealth Management Connect is an important measure by China in support of the GBA development and closer financial cooperation between the Mainland, and Hong Kong and Macao. It is conducive to the creation of a quality living environment within the GBA. It facilitates cross-boundary investment by individual residents in the GBA and promotes the opening-up of the Mainland’s financial markets as well as the mutual social and economic development of the Mainland, and Hong Kong and Macao”, the statement adds.
Wealth Management Connect will be governed by the respective laws and regulations on retail wealth management products applicable in the three locations with due regard to international norms and practices. Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, the Hong Kong Monetary Authority, the Hong Kong Securities and Futures Commission, and the Monetary Authority of Macao will discuss and agree on the implementation details including investor eligibility, mode of investment, scope of eligible investment products, investor protection, handling of disputes, etc. under the Northbound and Southbound Wealth Management Connect.
“Cross-boundary remittance under the scheme will be conducted and managed in a closed-loop through the bundling of designated remittance and investment accounts to ensure that the relevant funds will only be used to invest in eligible investment products. Cross-boundary remittances will be carried out in renminbi, with currency conversion conducted in the offshore markets. Cross-boundary fund flows under Northbound and Southbound Wealth Management Connect will be subject to aggregate and individual investor quota management. The aggregate quota will be adjusted through a macro-prudential coefficient”, it adds.
According to the entities, relevant regulators in the Mainland, Hong Kong and Macao will each take necessary measures to establish effective mechanisms under Wealth Management Connect to tackle, based on the principle of territorial administration, any illicit activities in a timely manner, with a view to protecting the interest of investors. “Relevant regulators in the Mainland, Hong Kong and Macao will enter into memoranda of understanding on supervisory cooperation to establish robust supervisory cooperation arrangement and liaison mechanism in order to protect investors’ interest and maintain orderly and fair trading”, it adds.
“The Mainland financial infrastructure institutions should actively take forward preparations for Wealth Management Connect in an orderly manner and with prudent risk management. The Wealth Management Connect pilot scheme will be formally launched once relevant rules and systems are in place”, the statement reads. The date of formal launch of Wealth Management Connect and implementation details will be separately specified.