Hong Kong's Banking and Insurance Regulators Build a Cross-Sector Net to Catch 'Rolling Bad Apples'

HIGHLIGHTS

The Hong Kong Monetary Authority and the Insurance Authority are stitching together their misconduct databases. At an industry briefing on Monday, Alan Au, the HKMA's Executive Director for Banking Conduct, laid out the implementation timeline for a cross-sector reference checking arrangement that will, for the first time, require banks and insurers to share seven years of conduct-related information on prospective intermediaries.

The mechanism is an extension of the Mandatory Reference Checking Scheme that the HKMA launched with the Hong Kong Association of Banks in 2023. That scheme began modestly, covering roughly 3,500 senior staff. It now applies to more than 50,000 employees engaged in securities, insurance, or MPF-regulated activities — approximately half of the banking workforce. By the end of 2025, banks had completed around 2,800 reference checks. Twenty-nine of those turned up negative information. The hit rate is small at roughly one percent, but Au framed it as validation: "It confirms that the Scheme is effective and that potential 'bad apples' are being identified."

The cross-sector arrangement, announced jointly last month by HKMA Deputy Chief Executive Arthur Yuen and IA Chief Executive Officer Clement Cheung, closes a gap that the original scheme left open. Staff who left a bank under a misconduct cloud could previously resurface in the insurance sector — or vice versa — without the receiving institution having access to the conduct history that prompted the departure. With over 110,000 life insurance intermediaries operating across both sectors in Hong Kong, the volume of cross-boundary movement was large enough to make the gap material.

Phase 3A, scheduled for July, will cover all life insurance intermediaries in banking and insurance entities. Reference checks will flow in both directions: a bank hiring an insurance intermediary will be able to query the individual's conduct record at a previous insurer, and an insurer hiring from a bank will have the same access. The seven-year lookback period is consistent with the original MRC Scheme, and the information exchanged is limited to conduct-related records — disciplinary actions, internal investigations, and breaches of regulatory requirements — rather than general employment references.

Au noted that the briefing was called specifically to address "remaining questions" and to help organisations ready their internal processes. The HKMA is treating Phase 3A as a foundation: feedback from the initial rollout will inform the scope of the next phase and potential expansion beyond life insurance into other segments of the financial services workforce. The two regulators are also in discussions with "other fellow financial regulators" to explore extending the framework into additional financial sectors.

The policy logic is straightforward. Hong Kong's financial sector is dense and interconnected, and a conduct record that stops at the boundary of a single regulatory perimeter is only as useful as that perimeter is wide. By linking the banking and insurance misconduct databases, the HKMA and IA are expanding the perimeter. The test will be whether the infrastructure that supports the July rollout — the IT systems, the legal protocols for information sharing, the training of compliance staff — functions smoothly enough to build confidence for a wider expansion. The 29 flagged cases from the banking-only scheme suggest the yield per thousand checks is low, but for the institutions that might otherwise have hired those 29 individuals, the mechanism has already paid for itself.