Special Report – The protracted revision of the Financial System Act

Macau will never be a real financial market without a legal system in line with the city’s needs, a long-protracted move which has been sluggish to take shape

MB April 2021 Special Report | Financial Hub in the making


The Financial System Act will be revised “very soon”. That was what the Government guaranteed in August 2018.

Almost three years passed, and nothing happened on the subject.

Or rather, a year later, the chairman of the Macau Monetary Authority (AMCM), Benjamin Chan, announced that the Government intended to complete the review of the Financial System Legal Regime in the second half of 2019, even announcing the novelty of criminalizing illegal loans.

Changing such a law is highly complex, due to the number of variables that have to be considered, but even so, it should be borne in mind that the former Secretary of Economy and Finance announced in 2016 that AMCM was studying how to carry out legislative work well, so that this financial activity can have a healthy development space.

“The biggest obstacle to the establishment of a financial sector in Macau is precisely the fact that there is no complete legal system to support the operations of this sector – let alone having basic guarantees for investors,” write the authors of a research project conducted by the City University of Macau named “Research on the factors of development of a financial sector in Macau”.

Lin Deqin and Leung Chung Sing point out the main flaws/priorities: “compared to other financial centers, Macau’s business environment does not yet have a specific regulatory framework. Consequently, there are no detailed mechanisms for risk prevention and control; there is also no legal regime established for financial supervision and for the location of institutions, not even a discipline for their functioning.”

“Privacy, anti-competition, human rights on information etc. are areas where existing regulations should be revised in light of this new technology [FinTech]. But not the technology itself. After all, technology, in and of itself, is neutral; only the use of it may not be,” Professor Adrian Cheung tells Macau Business.

“Without regulations, abuses and illegal activities cannot be controlled,” adds Professor Jacky So. The Dean, School of Business, MUST, understands that “as shown by the Ants Finance case, finance is the basis of FinTech. At one point, I pointed out that Jack Ma’s TechFin has conceptual problem: He wanted to let the ‘tail wag the dog’!”

Professor So explains to Macau Business about the Ants Finance case that “all governments, including Macau, should set up a safety net to prevent Monopolies or Oligopolies, because they can control the ‘market’ and thus the ‘market price’ that should be determined by the supply and demand of a Competitive Market (many traders).”

The task of adapting the regulation of the financial system to current times, which in itself is full of challenges, is made even more difficult by the uncertainty as to what China wants Macau to be, and even by the need to articulate – in the near future – the two special regions with the nine mainland cities that are part of the GBA. Having a legal system that caters not just to Macau but also to the GBA and the international business scene was indicated by Director of the Macau Chamber of Commerce, Paul Tse, as a crucial step towards gradually developing the city into a regional and international financial center. “Using Hong Kong as a benchmark may be misleading unless Macau is determined to be another international financial center. A proper way to move forward is to understand the strategic advantages of Macau in the Greater Bay Area,” underlines Professor Cheung, from City University of Macau, for whom the “European Union provides a leading example on this issue. Once this framework is laid down, specific rules for virtual banking business are, relatively speaking, easily dealt with.”

[In 2019 AMCM approved three guidelines on bond trading and the Guideline on Cyber Resilience. Last year, it published the Guideline on Risk Management of Financial Leasing Business. “In regard to FinTech, the AMCM is currently revising the Financial System Act, while a new chapter to regulate innovative FinTech activities will be proposed during this revision,” AMCM communicates to Macau Business.]

“The biggest obstacle to the establishment of a financial sector in Macau is precisely the fact that there is no complete legal system to support the operations of this sector” – Lin and Leung.


A Corporate Governance Code

“With the diversified development of Macau’s economy, it is crucial to establish an effective corporate governance code,” urged two professors from the University of Macau in a text recently published in Macau Business.

“Multinational corporations and institutional investors will only be more confident in the investment and business operations in Macau when local governance criteria are in line with international standards. In addition, Macau also has an increasing demand for the establishment of unified corporate governance code for local companies.” This according to Jean Jingchan Chen and Philip Law, both from the UM Faculty of Business Administration, who note that China already established theirs in 2001 (with updates in 2011 and 2016).

Because there’s “a growing concern about implementing corporate governance measures and good practices in Macau”, the Macau Corporate Governance Institute (MCGI), a non-profit association that includes major companies such as banks, gaming concessionaires and utility companies, was incorporated at the end of 2016.

“There is no main piece of corporate governance legislation in Macau. Instead, there is a sparse collection of norms scattered throughout different laws and regulations” state two local lawyers, Hugo M. Bandeira and Tiago Assunção, in a paper contributed to online service Thomson Reuters Practical Law. “There is no corporate governance code yet, but the MCGI is working on preparing a set of guidelines to be followed by Macau companies,” they note.


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