20 June 2018 |

HK PBs take stock of online trading offerings as regulatory changes loom

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Private banks in Hong Kong have different takes on how to best prepare for impending regulatory changes on online platform suitability, set to be implemented next year April.

According to the Securities and Futures Commission’s (SFC) new guidelines for online distribution and advisory platforms, platform providers must ensure that clients fulfil all suitability requirements before they are able to trade complex investment products — even if solicitation was not part of the sales process.

As the new guidelines will impact how trades can be conducted on private banks’ online platforms, Asian Private Banker spoke to three banks whose apps offer trading capabilities (see APB’s AppMap) — Credit Suisse Private Banking, DBS Private Bank, and VP Bank — about their app development strategies in light of the April deadline.

Credit Suisse: expanding trading capabilities is not a top priority
François Monnet, Credit Suisse’s head of private banking Greater China, private banking Asia Pacific and chief executive Hong Kong, told Asian Private Banker that the online trading platform is “pretty interesting as it stands today” before expressing concern over the new rules.

“The suitability question is a serious issue in Hong Kong in the sense that it is implemented for private banking clients in a way that is far too similar to that of a retail client, which puts a very significant burden on suitability and appropriateness, including online,” he said.

“In addition, we are aware that there might be new regulations around complex products, which would actually deserve full suitability disclosure, but this would make online trading almost impossible, so this is another hurdle to overcome.”

Monnet said Credit Suisse would not add “a lot of new trading capabilities” for the time being, because the bank was focused on implementing Canopy — an account aggregation service — as well as various ‘Go Green’ initiatives.

He added that there is “definitely” a category of simple structured products the bank could consider offering online, but this would depend on Credit Suisse’s 2019 priorities and decisions around adding trading capabilities or expanding self-service.

“We love the idea of self-servicing, as it allows clients to share their personal information and update documents via the app at their convenience, rather than having to submit physical forms to us,” he explained.

DBS aims to ensure full compliance by implementation deadline
The Hong Kong version of DBS’s iWealth App supports equity trades from seven major markets and FX trading for 14 different currencies while the Singapore version also features a leverage function exclusive to clients of the private bank.

Keng Swee Koh, treasury product and digital strategy head, product solutions, consumer banking group and wealth management at DBS, recently told Asian Private Banker the bank is conducting a review of its systems and is aiming to “ensure full compliance” by April next year.

In the meantime, DBS aims to launch basic unit trusts — considered to be non-complex products — on its iWealth App product shelf before the end of the year, after which, Koh said, the bank is interested in launching unit trusts — defined as complex products — on the platform.

Koh believes the guidelines issued by the regulator constitute “a balanced paper” that provides greater clarity on suitability requirements in the online space.

“There may be one or two areas that require further clarity, but it provides a good starting point to refine and build our online platforms,” said Koh.

VP Bank is currently “analysing the guidelines”
Among all private banking apps in Hong Kong, VP Bank offers the widest choice of asset classes for online trading, including shares, certificates, structured products, bonds, warrants and funds. As of now, the bank is yet to decide on its online strategy in the wake of the new regulations.

“VP Bank is analysing the guidelines as released by the Securities and Futures Commission of Hong Kong, and depending on the results, VP Bank will decide upon any changes,” Daniel Wiesmann, head digital banking business of VP Bank Group, told Asian Private Banker.

The bank integrated its e-banking system into its client portal last month, allowing for real-time online trading on the VP Bank mobile app.

“VP Bank is working on new features and digital services; trading forex is currently in discussion. These functionalities will be expanded in the coming months,” he added.

The SFC concluded consultation on guidelines for online distribution and advisory platforms in March. The guidelines will come into effect on 6 April 2019, 12 months after the official announcement.

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