HKMA launches cross-sector reference checking for finance
The Hong Kong Monetary Authority (HKMA) and Insurance Authority (IA) are launching a cross-sector reference checking arrangement between the banking and insurance sectors. This initiative, starting in July 2026, aims to prevent misconduct employees from moving between financial institutions.
Cross-sector net for misconduct
The new cross-sector arrangement, set to begin in July 2026, will cover all life insurance practitioners in both banking and insurance institutions.
Through a mutually agreed mechanism, banks and insurance firms will be able to share conduct-related information about prospective employees from the past seven years.
This enables comprehensive background checks across sectors, effectively closing the loophole that previously allowed individuals with misconduct records to move undetected between the banking and insurance industries.
The initiative builds on the success of the banking sector's mandatory reference checking scheme, which, by the end of 2025, had completed approximately 2,800 checks, identifying 29 cases (about 1%) involving negative conduct information.
This demonstrates the effectiveness of such a system in identifying and addressing problematic individuals.
The challenge of hidden histories
The arrangement directly addresses the 'rolling bad apples' phenomenon, where employees involved in misconduct resign swiftly and move to another financial institution, concealing their past issues.
This practice not only endangers individual firms but also risks spreading misconduct throughout the broader financial sector, a concern shared by many international financial regulators.
The HKMA, in collaboration with the Hong Kong Association of Banks, previously implemented a mandatory reference checking scheme within the banking sector.
This scheme expanded from covering 3,500 senior staff in 2023 to approximately 50,000 employees engaged in regulated activities by 2025, encompassing over half of all banking practitioners.
A necessary step for integrity
This cross-sector arrangement marks a crucial milestone for enhancing integrity across Hong Kong's financial sector.
It effectively closes a long-standing vulnerability, preventing individuals with misconduct records from simply shifting sectors and undermining public trust.
While implementation requires careful coordination, this initiative demonstrates a robust commitment to fostering good conduct and safeguarding Hong Kong's financial reputation.