As banks in Hong Kong brace for fierce competition from virtual banks, HSBC on Wednesday said it is scrapping minimum balance fees and associated charges.

HSBC announced on Wednesday that it will scrap the minimum balance fee that applies to its 3 million customers in Hong Kong. From August 1, it will be the first bank in Hong Kong to go back to providing free basic banking services to retail customers who hold its passbook accounts, statement accounts, personal and advance integrated accounts and super ease accounts.

To reinforce HSBC’s commitment as Hong Kong’s leading bank, it will also waive off associated charges faced by small depositors, like counter transaction fees.

«More than 3 million retail banking customers will benefit from the removal of our below-balance fees, counter transaction fees and annual fees for most our personal savings accounts,» said Greg Hingston, HSBC’s head of retail banking and wealth management in Hong Kong, who was quoted in «South China Morning Post». 

Virtual Banks Barred From Charging

Introduced 18 years ago, the monthly charge of HK$50 for small depositors with a passbook savings account and other basic accounts with a balance below HK$5,000 (US$640), is seen as a penalty on some of the bank’s most loyal customers. 

The move comes as the Hong Kong Monetary Authority (HKMA) issued eight virtual bank licenses since March. The virtual bank licensees, who operate solely online, are not allowed to charge a minimum balance fee to small depositors. Such zero-cost bank accounts would likely lure millions of customers away from banks who are still charging small depositors.

Others Likely to Follow Suit

The move is likely to be followed by other big lenders as they brace for the intense competition from the virtual banks due to come online later this year. Hang Seng Bank, a unit of HSBC, is also considering a plan to scrap its minimum-balance fee, according to a spokesperson.

«Banks should draw up their fees structures in accordance with their own corporate strategies, service models and costs,» an HKMA spokesperson said. «However, the HKMA has constantly reminded banks to keep in mind the public’s expectations and needs in basic banking even while they run their banks based on business principles.»