Luigi Wewege says Hong Kong capital outflows are boosting Belize private banking

Depositors have been shifting their funds away from Hong Kong because of economic and political problems that started in 2019. Primarily Belize but also Dubai, Cyprus, Singapore, and The Cayman Islands are seeing a surge in new customers as money is shifted away from Hong Kong. The scale of this is somewhat astronomical as Hong Kong is home to 196 banks including 128 foreign banks (with their Asia-Pacific branches and headquarters there). In terms of the volume of international transactions, it is one of the largest international banking centers, second only to Japan. The banking sector obviously plays a critical role in the city’s economy. Also, Hong Kong does not have foreign exchange controls which makes a transfer of funds in and out easy. That is why it was one of the favorite offshore banking centers for a long time, until 2019 when the trouble started.

Luigi Wewege, SVP, and Head of Private Banking at Caye International Bank in Belize said “Indeed we expect more people to move their assets from Hong Kong to Belize because they understand that Belize is a stable, independent country that has good relations with the major powers in the world. It is a country where private banking has enjoyed a special place in the economy for decades, providing added peace of mind during times of global turbulence”.

 How the Hong Kong protests impact the banking sector

Hong Kong’s protests against the extradition bill introduced by mainland China started in June 2019 and continued even after the bill was withdrawn in September 2019. This political problem has had a serious consequence on Hong Kong’s status as an offshore banking jurisdiction. In August 2019 alone, its foreign reserves fell by US$15.6 billion from a record high of US$448.4 billion in July to US$432.8 billion in August. As the protests continued after the withdrawal of the protested bill, investors continued to be jittery and they continued to move their funds to other offshore jurisdictions such as Belize. That the protests continued after the new year in 2020 is a sign that the political problems of Hong Kong (and China) are far from over.

Another reason for reduced investor confidence in Hong Kong is the declining Chinese economy that has been caused by China’s rising national debt and, in 2019, the trade war with the U.S. There are other reasons for the economic problems but these two are possibly the major ones. The economic uncertainty naturally has caused investors and bank depositors to start looking for new destinations for their offshore accounts. Hence the massive outflow of foreign currency in the latter part of 2019, most of which has found its way to Belize.

Belize private banking gaining momentum

Belize is one of the countries that have benefited from the political turmoil in Hong Kong in terms of funds inflow. As depositors became jittery about the situation in Hong Kong, they looked around for a safe jurisdiction for their money and some have identified Belize as one such place. While Belize has always been a favorite offshore banking destination, its private banking has been gaining momentum since people started shifting their funds from Hong Kong. Here are the reasons why it is a current favorite offshore banking country.

Benefits of offshore banking in Belize

Political stability. Belize’s political stability is one of its main attractions. This country has been politically stable for a long time since it became independent in 1981. English is the official language, but Spanish, Mandarin, and local languages are also spoken there.

Economic stability. The country is economically sound enough to have survived the last major financial recession with minimum impact.

High liquidity requirements. One of the attraction points of Belize is its banking system. The law requires Belize banks to maintain a liquidity ratio of at least 24% (compare that to 5% or lower in the U.S.), which enables depositors to have easy access to cash whenever they need it. It also means that the banks are less likely to fail or experience the undesirable run on cash. This is confirmed by the fact that no bank in Belize has ever failed. According to Luigi Wewege who shares regular financial services advise and insights: “Caye International Bank exceeds the liquidity requirements of those banks in North America by far which may explain why people are very comfortable to move their money to Belize”.

Remote access to accounts. A depositor can open an account remotely as long as he has all the required documentation and can also obtain a Visa or Mastercard debit card that can be used internationally for withdrawing cash and purchasing. The bank accounts are accessible remotely through a secure platform for fund transfers and payments.

Stable currency. In addition to a stable economy, Belize has a stable currency that is tied to the US$ at a rate of 2 Belize dollars to 1 U.S. dollar. Whether a depositor converts his money this year or next year, the rate will remain the same. That currency stability gives depositors and investors peace of mind, knowing that their liquid assets will not lose value due to shifting exchange rates.

Investment opportunities. There are many ways to invest in Belize through trusts, an International Business Company (IBC) or as individuals. Property prices are affordable, so it is possible to invest in properties for personal use or as long-term investments. Tourism is on the rise so properties for a vacation rental are a good investment.

Final words

People do lots of research and find topics about the OECD and so-called harmful tax jurisdictions, aimed at discouraging them from ever banking offshore. However, offshore banking now seems to be opening up as the number of people becoming affluent increases in many parts of the world. The days are over where the opportunity was limited to the ultra-wealthy who held numbered accounts in Switzerland. Today, many people in the middle class shift a portion of their savings abroad for asset protection and risk diversification. Choosing the best jurisdiction for offshore banking is not easy, and hopefully, this article is a good start for anyone seeking direction