Greater Bay Area regulators float wealth management connect scheme

It allows residents to invest in wealth products offered by banks in the area.

The Hong Kong Monetary Authority (HKMA), the People’s Bank of China, and the Monetary Authority of Macao plan to implement a cross-boundary wealth management connect pilot scheme in the Greater Bay Area as a means to facilitate cross-boundary investments by individuals in the area, a joint announcement revealed.

Wealth Management Connect is an arrangement under which residents can carry out cross-boundary investment in wealth management products distributed by banks in the GBA.

The scheme has a southbound and a northbound component, depending on the residency of the investors. Under Southbound Wealth Management Connect, 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.

Meanwhile, under Northbound Wealth Management Connect, residents of Hong Kong and Macao can invest in eligible wealth management products distributed by Mainland banks in the Greater Bay Area by opening designated investment accounts with these banks.

The arrangement aims to facilitate cross-boundary investment by individual residents in the Greater Bay Area and to promote 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 financial sector has been looking forward to the launch of the scheme to better serve the growing demand for cross-boundary wealth management and investment services by GBA residents. Today’s announcement once again underpins Hong Kong’s strategic importance in the Mainland’s financial open-up process and our unique role in meeting the asset management needs of residents across the boundary,” said Eddie Yue, chief executive of the HKMA.

“The HKMA will work closely with the Hong Kong Securities and Futures Commission, the relevant Mainland authorities, and our financial industry to formulate the implementation details based on the framework announced today, with a view to rolling out the scheme as soon as practicable,” he added.

The formal launch of Wealth Management Connect and implementation details will be announced in a separate announcement at a later date.

Wealth Management Connect will be governed by the respective laws and regulations on retail wealth management products applicable in the three places with due regard to international norms and practices.

The People's 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, amongst others.

Both the Northbound and Southbound schemes 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, according to the announcement.

Photo courtesy of Pexels