For the longest time, Macau has been seen as a synonym for glitzy casinos and picturesque architecture. But in recent years, the former Portuguese colony has been pulling out all the stops to buttress its financial credentials. In fact, developing Macau’s financial industry has been a major administrative policy since 2019.
In pursuit of its ambition to become an international financial hub, Macau’s Legislative Assembly in August passed new amendments to the Financial System Act in a bid to future-proof its financial system and keep its regulations on par with international standards.
“Overall, these amendments demonstrate a commitment by the Macau government to strengthen its financial system and ensure it keeps pace with the evolving needs of the sector,” say Pedro Cortes, managing partner at Macau-based law firm Rato, Ling, Lei & Cortés, and Calvin Chui, a partner at the firm.
“By establishing a regulatory environment that promotes transparency, accountability, and efficiency, Macau aims to enhance its competitiveness and attract financial innovation within the Greater Bay Area, the Guangdong-Macao In-depth Cooperation Zone, and further fosters its role as a platform between China and the Portuguese speaking countries,” add Cortes and Chui.
Set to take effect from Nov. 1, one of the most notable new measures is the introduction of a more flexible and simplified licensing process for banks specialising in particular areas. Currently, both full-service banks and specialist banks are subject to the same application criteria when applying for a banking licence. Under the new rules, these “restricted license banks” will need a minimum registered capital of 100 million patacas ($12.4 million). The same for unrestricted banks, on the other hand, goes up from 100 million to 300 million patacas ($37.2 million).
A temporary licensing system for non-financial institutions engaging in fintech-related activities was also heralded to encourage innovations in financial products and services, according to lawyers.
“The inclusion of licensing procedures in the amendments is crucial as it ensures that financial institutions operating in Macau meet certain standards and requirements. This helps to safeguard the interests of consumers and maintain the integrity of the financial system,” say Cortes and Chui.
Separately, in a move described as to raise governance standards, the amendments have raised the minimum number of directors for credit institutions in Macau from three to five while mandating the establishment of a supervisory board with enhanced suitability requirements.
“Strengthening supervision helps to ensure that financial institutions comply with regulations and maintain sound financial practices. This contributes to the stability and resilience of the financial system,” note Cortes and Chui.
Apart from enhancing oversights, the territory known as “Asia’s Las Vegas” also heightened penalties and fines for illegal financial activities while expediting enforcement. The Monetary Authority of Macau (AMCM) has also been given more power to supervise accountants and obtain urgent information from them upon request.
In addition, the AMCM has become the body to register for bond issuance as the SAR is determined to build up its financial infrastructure across the board. Previously, publicly issuing bonds required the authorisation from Macau’s chief executive. “The registration of bond issuance is another significant aspect covered by the amendments. By implementing a registration process, the amendments aim to enhance transparency and accountability in the bond market. This allows investors to make informed decisions and promotes a fair and efficient market,” Cortes and Chui say.
Lawyers believe the amendments provide clearer guidance on assessing licenses, streamline administrative procedures, bolster governance standards and align Macau with global regulatory practices. As the amendments take effect, it is expected that a broader range of financial institutions will be attracted to commence their business in Macau.
However, Cortes and Chui say it would be challenging for the existing financial institutions to transition their operations and systems to comply with the new Act.
“Following the enactment of the Act, additional regulations, as well as instructions and guidelines issued by the AMCM to enable the implementation of the legislation, are likely to be published. This may involve (financial institutions) reviewing internal policies and procedures, assessing governance and risk management practices, and ensuring compliance with the forthcoming regulatory requirements,” note Cortes and Chui.
“What changes need to be made? What kind of internal procedures need to be enhanced? What areas and teams need to adapt? What are the priorities? These are what we are focusing on since the law as firstly announced,” they add.
