Bank of China (Hong Kong)

Bank of China Group

The opening of a branch of the Bank of China in Hong Kong in 1917 marked the entry of state-owned Chinese banks into the then-colony's banking sector. Other banks soon followed suit, starting with Yien Yieh Commercial Bank in 1918. By the time the People's Republic of China was established in 1949, there were 15 branches of state-owned Chinese banks in Hong Kong, plus branches of nine mainland-incorporated banks that were public-private joint ventures. In addition, the Chinese government established Po Sang Bank in 1949 and Nanyang Commercial Bank in 1950. Both of these were incorporated in Hong Kong.

In 1952, the nine public-private banks (namely, Sin Hua Bank Limited, China & South Sea Bank, Kincheng Banking Corporation, China State Bank Limited, The National Commercial Bank Limited, Yien Yieh Commercial Bank, Young Brothers Banking Corporation, Wo Sang Bank and National Industrial Bank of China) were grouped into the Joint Office of Joint Public-Private Banks. The Hong Kong branches of the last three of these nine were closed in 1954 when their parents were shut down by the central government, and management of the remaining six public-private banks were transferred to the Hong Kong and Macau Regional Office of the Bank of China in 1958. The Bank of China later took over management of the Hong Kong branches of Kwangtung Provincial Bank, Hua Chiao Commercial Bank and the Bank of Communications (HKSE: 3328).

In June 1975, the Bank of China moved to increase the capital of the public-private banks. As all of the new capital was from the Chinese government, private ownership in the public-private banks was substantially reduced, in some cases to less than 1%.

The 14 banks were rebranded as part of the Bank of China Group in the 1980s, after a common IT platform was established. Treasury and foreign currency exchange operations were also centralised. However, the individual banks retained their own management. They are now the second-largest banking group in Hong Kong.

Restructuring and listing

The Hong Kong branch of the Bank of Communications broke off from the Bank of China Group in 1998. The Bank of China Group started to restructure its operations in 1999 in preparation for an initial public offering. All minority shareholders (except for those of Chiyu) were bought out by the Bank of China. Formal plans for a restructuring received the approval of the People's Bank of China and were launched in January 2001.

The restructuring saw all operations of the mainland-incorporated group members merged into Po Sang Bank, which was then immediately renamed Bank of China (Hong Kong) Limited. Hong Kong incorporated Nanyang Commercial Bank and Chiyu Banking Corporation became subsidiaries of Bank of China (Hong Kong) Limited. Legislation was required for the merger, as Hong Kong does not allow mergers via the pooling of interests, a common procedure in the United States. The Bank of China (Hong Kong) Limited (Merger) Ordinance was approved by the Legislative Council of Hong Kong on 12 July 2001, and the merger was completed on 1 October 2001.

BOCHK offers a comprehensive range of financial products and services to retail and corporate customers, similar to those offered by most commercial banks. It is primarily known for its interest-income business (taking deposits from retail customers for loans to corporates) although it has been moving into other non-interest-income areas such as personal loans, wealth management and other financial services in recent years. It has Hong Kong's biggest branch network including approximately 190 branches, 280

automated banking centres, over 1,000 automatic teller machines as of end 2019.

BOCHK is one of the key mortgage lenders in Hong Kong. The other key lenders include HSBC and Hang Seng Bank. Within mainland China, BOCHK operates 14 branches (as of January 2005) separately from its parent. BOCHK is treated as a foreign bank, more properly, 境外銀行 (banks outside of the territory), for regulatory purposes as it is incorporated in Hong Kong. However, partly to clear up confusion between it and its parent in the mainland, it shifted all of its mainland-based business to Nanyang Commercial Bank in 2007.

Renminbi clearing bank

BOCHK has been the designated clearing bank for personal transactions involving the Renminbi (CNY, the currency of mainland China) in Hong Kong since February 2004. This means that BOCHK acts as a settlement agent for RMB banknotes and funds in Hong Kong and an intermediary between banks in Hong Kong and the People's Bank of China, the central bank of the People's Republic of China. In return, BOCHK takes a 0.125% cut of all RMB deposits in Hong Kong that are repatriated back to mainland China.