Banking and Gold Storage in Hong Kong

March 23, 2010
Hong Kong, SAR

The banking system in Hong Kong is one of the most advanced in the world, and if you’re shopping around for a place to plant a banking flag, you should definitely consider it.

As a jurisdiction, Hong Kong was effectively founded and built into a global financial center for the sole purpose of bridging east and west. Today, as Asia has grown into an economic powerhouse, Hong Kong is still the region’s center of banking and commerce– like London in Europe or New York in the Americas.

In particular, though, there are a few things that I think set apart Hong Kong as a banking jurisdiction:

First, the banks in Hong Kong are actually well-capitalized.  Unlike banks in the west which have used fuzzy accounting tricks and nearly interest-free government loans to prop up their balance sheets, Hong Kong’s banks actually have their own substantial cash reserves on the balance sheets.

Furthermore, the banks are reasonably and appropriately regulated without any undue government interference or hypocritical political backlash.

Second, I find banking in Hong Kong to be cheaper and more efficient than many other jurisdictions.  Wires often take place instantaneously, and costs for international transactions are a fraction of the price that I pay in the United States and Europe.

Third, because Hong Kong as a jurisdiction is ultimately backed by its big brother mainland China, bankers in Hong Kong have a certain confidence in being able to deliver more personalized service.

Once your account is approved, you’re in the club… and bankers will go out of their way to service your needs without constantly quoting you the latest OECD requirements.

The tough part about Hong Kong is getting approved, especially for a business account. Most banks will want to see the whites of your eyes before opening an account for you, which is a dreadful inconvenience for most people.

I discussed one ‘short-cut’ for doing this a few weeks ago, though if you find yourself traveling to the region, I always recommend that people go visit the bank that they’ll be doing business with so that you can feel more comfortable about the relationship.

Besides, Hong Kong is a fantastic city and worth a visit… though I must admit the air is quite dirty today– I see nothing but haze from my room on the 38th floor of the W Hotel, apparently due to some sandstorms in central China… but I digress–

Another reason for visiting Hong Kong is to buy and store gold, which you can also do at just about any bank in town. My friend Tim, a brilliant financial mind and fellow Atlas-400 member, is also in town, and he was just telling me about some interesting anomalies he noticed in the gold market:

Prices are not uniform. The buy price on a one ounce Canadian Maple Leaf coin (what the bank will pay you) at Hang Seng bank is HK$8,520 (roughly $1,097). At Bank of China, the buy price is 4% higher.

Furthermore, Tim seems to have found an arbitrage opportunity in Chinese panda gold coins, which for some reason sell for a much higher premium to spot price in the United States than they do here in Hong Kong.

Once you’ve acquired gold, storing it in Hong Kong is quite easy at any number of banks; I have worked with NCB Bank, Public Bank (out of Malaysia) and HSBC in the past, and they generally have safety deposit boxes available.

There is also a private storage facility called, appropriately, “The Storage”.  It’s located in a rather peculiar part of town, but the facility is quite secure with 24-hour armed guards and backup redundant systems.

Unfortunately, The Storage does not do anonymous box rentals, which is a fairly recent policy change.

Their box rental charges are about $75 (USD) per year, and you can prepay up to 2-years in advance.  As always, it’s best to call first to find out what documentation requirements are necessary.