Parentage would also be important – it would be highly desirable from our point of view that an internet bank was itself majority-owned by another well-established bank that could provide guidance and financial support if necessary. In general, we would need to be assured that the virtual bank has “substance”, and is not simply a “concept”, taking advantage of the popularity of the internet. On this basis, our authorisation and supervisory regime for virtual banks would be similar to that for conventional banks. However, an offshore internet bank, whether wholly “virtual” or not, might not attempt to take deposits in Hong Kong in the strict legal sense – in other words, the deposit contract might not necessarily be created in Hong Kong. Instead, the offshore internet bank might invite potential customers to send their money to a location abroad, where the deposit would be legally created. In this case, the bank would be taking deposits outside Hong Kong and would not require authorisation under the Banking Ordinance to carry on a deposit-taking business here. But that is not the end of the story. It is also an offence to advertise for deposits in Hong Kong, even if they are to be taken outside the territory, unless the disclosure requirements of the Fifth Schedule of the Banking Ordinance are adhered to. An advertisement would include one contained on a website. The problem is how to determine whether a particular offshore website is targeted at Hong Kong.
Here, we would have to look at the circumstances of each case – whether, for example, the offshore internet bank advertised its services in the local Hong Kong press or accepted Hong Kong dollar deposits or refused to take deposits from a number of specified jurisdictions, but did not include Hong Kong among these. If we come across such cases of illegal advertisements targeted at Hong Kong, how would we deal with them? The easiest case would be where the bank itself is respectable and is based in an overseas location which is properly supervised. We could then write to the bank itself and to its supervisors to notify them of the advertising rules in Hong Kong, and request the bank either to comply with these rules or to add Hong Kong to the list of the jurisdictions from which it was not prepared to take deposits. If necessary, we would seek the cooperation of the home supervisor to enforce this request. It might also be necessary to supplement this with a reminder to local Internet Service Providers about the advertising rules in the Banking Ordinance and to seek their cooperation to block offending websites. The problem with this, however, is that the website in question may not actually be posted on the local ISP’s server – in which case, there may be little that the ISP can do. If the bank concerned is not respectable and it is based in an uncooperative jurisdiction, the situation would be more difficult to handle.