Understanding Macao's Banking Supervision: One New Law, a Regulatory Rulebook, and a Risk-Based Supervisory Philosophy

HIGHLIGHTS

The regulatory ecology of Macao's financial sector is structurally different from that of the mainland. As a micro open economy with a free port policy, Macao has formed a unique centralized unified financial regulatory regime, under which the Monetary Authority of Macao (AMCM) exercises consolidated supervision over the banking, insurance, and securities and funds industries. The key starting point for understanding this regime is the Legal System of the Financial System promulgated in 2023.

I. The Legal Cornerstone: The 2023 Legal System of the Financial System

The Legal System of the Financial System (Law No. 13/2023), adopted on 31 July 2023 and effective from 1 November 2023, replaced the former Decree-Law No. 32/93/M of 5 July, and has become the "fundamental law" for banking supervision in Macao. The background to this amendment was that the original regulatory framework was no longer sufficient to cope with the rapid development of fintech, the continuous evolution of international regulatory standards (such as the full implementation of Basel III), and the new demands placed on regional financial regulatory coordination by the in-depth integration of the Guangdong-Hong Kong-Macao Greater Bay Area.

The new law covers core areas such as institutional access, supervisory powers, and risk control. It is complemented by a system of special regulations including: the Deposit Protection System (Law No. 9/2012 and Administrative Regulation No. 29/2024), the Trust Law (Law No. 15/2022), the Investment Funds Law (Law No. 11/2025), as well as the Exchange Regime and rules on the use of local currency. The completion of this legal hierarchy has filled the legal basis for Macao's wealth management and fund businesses.

II. Five Key Features of the Regulatory Rulebook

Underneath the foundational laws, the AMCM has constructed a regulatory rulebook covering capital adequacy, liquidity, credit risk, operational and IT risk, and AML/CFT through a series of guidelines, circulars and notices. This rulebook exhibits five distinctive features:

Dynamic Adaptability. Regulatory rules are updated in a timely manner in response to market changes. For example, the guidelines on liquidity risk management and mortgage ratio rules were revised in 2025, reflecting the regulator's responsiveness to market conditions. A comparison of old and new versions of guidelines (e.g., outsourcing management, e-banking) clearly demonstrates the logic of regulatory iteration.

Risk-Based Orientation. Rules are formulated hierarchically by risk type (credit, operational, country, etc.), with the capital adequacy ratio running through multiple areas as a core indicator. IT risk management (cyber-attack protection, mobile payment security) carries significant weight, reflecting the trend of digital transformation. The AMCM does not simply enforce fixed rules but requires banks to take differentiated measures based on risk characteristics — for instance, the frequency of customer review should be determined according to the customer's risk level.

Cross-Border Synergy. Special mechanisms for Greater Bay Area financial innovation (the Cross-border Wealth Management Connect, the Cross-border Fintech Innovation Test) reflect the deepening of regional regulatory collaboration. Measures such as allowing simplified sales of mainland local government bonds (Guideline 014/B/2025-DSB/AMCM) promote market connectivity.

Refined Tiered Supervision. Business rules exhibit differentiated requirements: distinguishing professional investors from general consumers, providing special protection for elderly customers, and implementing targeted AML measures for gaming-related customers. In terms of instruments, the expected credit loss model and stress testing guidelines (015/B/2022-DSB/AMCM) improve the precision of risk measurement.

Prominent Practical Guidance. A large number of supporting templates (e.g., executive appointment schedules, innovation project application forms) and operational rules (self-service equipment setup, one-time password specifications) provide banks with concrete execution standards.

III. Supervisory Approach: A Combination of Off-Site and On-Site Methods

The AMCM adopts a risk-based supervisory approach, focusing on understanding the principal businesses and associated risks of financial institutions and comprehensively assessing their risk management measures, internal control policies and procedures. Supervisory methods encompass off-site reviews, on-site inspections, special investigations, assessments by external auditors, questionnaire surveys, cross-border supervisory cooperation, and supervisory meetings with bank management. Banks are required to submit various returns and reports on a daily, monthly, quarterly, semi-annual and annual basis, while dedicated on-site inspections are typically conducted every one to two years.

IV. Industry Self-Regulation and Inter-Departmental Coordination

In addition to government supervision, Macao's financial sector has established a governance framework of industry self-regulation and inter-departmental collaboration. The Macao Association of Banks, the Macao Insurers' Association, and the Macao Securities and Funds Association are responsible for formulating industry self-regulatory standards, regularly gathering industry development demands, and coordinating with the AMCM to incorporate industry standards into regulatory rules. In the AML field, the Financial Intelligence Office has established a joint AML conference mechanism with the AMCM, the Financial Services Bureau, the Judiciary Police, the Customs Service, and the tax authorities. In the area of cross-border cooperation, the AMCM and the Guangzhou Branch of the People's Bank of China have established a cross-border regulatory sandbox, carrying out in-depth cooperation in areas such as mutual recognition of green financial products and the development of fintech regulatory tools.

For commercial banks operating in Macao, this regulatory framework means they need to establish "localized thinking" — respecting the regulatory uniqueness under Macao's high degree of autonomy and avoiding the simple application of the mainland's regulatory logic; at the same time, they need to embed themselves in the regulatory cooperation network, achieving two-way empowerment through participation in industry associations, interfacing with regulatory sandbox projects, and establishing regular dialogue mechanisms.