Hong Kong Banks Enter 2026 on Solid Footing as HKMA Zeroes In on Resilience, Fraud & AI

Key Takeaways

• Resilience Backed by Strong Capital and Liquidity: Banks ended 2025 with a 25.1 percent total capital ratio and liquidity levels comfortably above statutory minimums, reinforcing system stability entering 2026.
• Credit Risk Remains Manageable but Under Active Surveillance: Classified loan ratios rose to 2.01 percent overall, prompting continued vigilance, proactive scrutiny and close monitoring of asset quality.
• Operational Resilience Becomes the Baseline in May 2026: All banks are expected to meet resilience requirements by end-May 2026, marking a shift from implementation to sustained, embedded resilience oversight.
• Fraud and AML Controls Move Toward Ecosystem Coordination: Despite a slight decline in deception cases, HKMA is expanding data sharing, real-time monitoring, and more direct AML supervision, including increased on-site examinations.
• AI, Digital Assets and Climate Risk Are Now Core Supervisory Themes: A new crypto prudential framework, Fintech 2030 initiatives, and continued sustainable finance development signal that technology and climate risk are fully embedded in the prudential agenda.

Deep Dive

Hong Kong’s banking sector closed 2025 in a position of strength, according to the Hong Kong Monetary Authority’s (HKMA) year-end review. Capital and liquidity buffers remained robust, credit risks were described as manageable, and supervisory work over the past year focused heavily on operational resilience, fraud prevention and technology risk.

But the document reads less like a victory lap and more like a transition point. With an operational resilience deadline approaching in May 2026 and fraud, AI and digital asset risks continuing to evolve, the regulator’s priorities for the year ahead suggest a tightening integration of prudential supervision, cyber oversight and conduct controls.

By the end of 2025, Hong Kong banks reported a total capital ratio of 25.1 percent, with Tier 1 capital at 23.0 percent and CET1 capital at 20.7 percent. Liquidity remained well above statutory minimums, with the Liquidity Coverage Ratio for Category 1 institutions reaching 165.6 percent and the Liquidity Maintenance Ratio for Category 2 institutions at 68.3 percent in the fourth quarter.

Those figures provide a stable backdrop as the sector navigates a still-challenging credit environment.

Loan growth returned to positive territory in 2025, rising 2.3 percent after declines in the previous three years. Deposits grew 11.8 percent. The classified loan ratio for overall lending reached 2.01 percent, while Mainland-related lending stood at 1.94 percent. The HKMA described credit risk as manageable.

For 2026, the regulator said it will remain vigilant to the evolving credit landscape, closely monitor asset quality and apply proactive scrutiny to potential risks, while maintaining a pragmatic approach to corporate difficulties and supporting SME lending and business transformation.

Operational Resilience Moves From Program to Baseline

The clearest supervisory milestone is operational resilience. The HKMA said all banks are on track to be operationally resilient by end-May 2026. After that, the framework will shift toward sustaining resilience as business as usual.

Cyber and third-party risk remain central to that effort. In 2025, the Authority pointed to strengthened cybersecurity through C-RAF 2.0 and Secure Tertiary Data Backup implementation, enhanced guidance on cloud adoption, progress toward Hong Kong’s first cross-sectoral Cyber Map and groundwork for implementing the Protection of Critical Infrastructures (Computer Systems) Ordinance in 2026.

Next year’s agenda includes strengthening cyber resilience maturity across the risk management lifecycle, advancing cyber mapping, implementing new international standards on third-party risk management and deepening supervisory engagement on cloud adoption.

Fraud Pressures Persist Despite Slight Improvement

Fraud trends in Hong Kong showed modest improvement in 2025, though the scale of activity remains significant. Deception cases totaled 43,212, down from 44,480 the previous year. Reported losses fell to approximately $1.04 billion (HKD 8.1 billion), compared with roughly $1.18 billion (HKD 9.2 billion) in both 2023 and 2024. Fraud-related banking complaints also declined to 579, from 828 a year earlier.

The Hong Kong Monetary Authority pointed to expanded ecosystem-wide responses aimed at strengthening prevention and detection. These included the full launch of “Money Safe” across retail banks, tighter name-matching requirements for real-time transfers, and expanded use of Scameter data to support earlier fraud detection. The Authority also conducted a thematic review of authorized payment scam monitoring systems and strengthened 24/7 stop-payment mechanisms to allow faster intervention once suspicious transactions are identified.

The HKMA plans to pilot analysis of multi-institutional data to improve cross-bank fraud detection and disruption. It also intends to expand Scameter and Suspicious Account Alert coverage, enhance customer identity authentication through iAM Smart, and continue public education efforts aimed at reducing victimization.

AML Supervision Becomes More Direct

On financial crime, the HKMA said it adopted a more direct and proactive supervisory approach in 2025. Legislation was enacted to provide legal gateways and protection for bank-to-bank information sharing, and Enhanced FINEST was implemented in collaboration with Police. The Authority also doubled the number of on-site examinations and supported banks’ use of artificial intelligence to strengthen suspicious activity monitoring.

Guidance was issued to mitigate high-end money laundering risks and enhance risk-based AML and CFT controls for politically exposed persons. For 2026, the HKMA described an effective, adaptive and future-focused AML supervision approach centered on understanding and disrupting threats, enhancing and protecting controls, and collaborating and sharing information.

AI, Crypto and Climate Embedded in the Supervisory Agenda

Technology risk and innovation feature prominently in the 2026 roadmap. A new prudential framework for cryptoassets took effect on 1 January 2026.

Under its Fintech 2030 strategy, the HKMA outlined initiatives including finance-specific AI models, a Responsible A.I. Toolkit, a Fintech Cybersecurity Baseline, a Real-time Cyber-threat Index and a Quantum Preparedness Index, alongside a Supervisory Incubator for distributed ledger technology and a Holistic Risk Data Strategy.

Consumer protection in the use of generative AI is explicitly listed among 2026 priorities.

On sustainable finance, the Authority reported publishing Phase 2A of the Hong Kong Taxonomy for Sustainable Finance, advancing engagement on sustainability disclosures and launching a second round of consultation on transition planning guidelines. Climate risk management remains on the 2026 agenda.

The review portrays a banking system that remains financially resilient but faces a supervisory landscape increasingly shaped by operational, technological and ecosystem risks.

With operational resilience expectations crystallizing in May 2026 and expanded scrutiny of fraud, AML, AI and digital assets underway, Hong Kong banks enter the year ahead with strong buffers and a regulatory agenda that places resilience at the center of prudential, conduct and technology oversight.

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