GGRAsia – Huge jump urged in capital deposit for new Macau junkets

Huge jump urged in capital deposit for new Macau junkets

Jul 17, 2017 Newsdesk Latest News, Macau, Top of the deck

Kwok Chi Chung, president of Macau’s Association of Gaming and Entertainment Promoters, has told GGRAsia that the capital deposit for any licensed casino junkets newly-registered in Macau should be as high as MOP50 million (USD6.2 million). Currently the deposit amount for licensed junkets – a sum set in 2004 – is only MOP100,000. Under the proposal, existing junkets would be allowed to keep their current levels of deposit.

But Mr Kwok – a former official of the city’s Judiciary Police – said he believed the much higher amount he suggested was “proportional” to the operational scale of many of the VIP gaming businesses in the city.

Mr Kwok first expressed his latest idea for dramatically raising the capital deposit threshold for market newcomers during a television discussion programme called “Macau Forum”, broadcast on Sunday by the Chinese-language service of local public channel TDM, though he did not go into detail about the reasons.

But he told us on Monday: “For many junket promoters here, the business scale that we’re talking of is a multibillion [pataca] rolling chip turnover per month. To match that scale, I think the capital requirement can be as high as MOP50 million.”

Macau’s casino regulator Gaming Inspection and Coordination Bureau – also known by the Portuguese-language acronym DICJ – had announced in September 2015 that it would work on a revision of the local junket licensing rules, with a focus on new requirements for the amount of capital to be held.

The announcement came soon after a series of alleged fraud cases involving millions of U.S. dollars taken from junkets. The incidents called attention to the issue of junket liquidity and the sustainability of the sector during what was a VIP gambling downturn linked in part to China’s anti-corruption campaign. Detailed plans for such a revision have yet to be announced.

VIP rebound

Since then the VIP segment has made something of a comeback. VIP GGR expanded by 16.8 percent year-on-year in the first quarter of 2017, according to gaming bureau data released in mid-April. Second-quarter VIP GGR rose 34.8 percent year-on-year, according to data released on Monday by the local regulator

In April last year, Mr Kwok’s association had suggested raising the required deposit to MOP10 million for newcomers to the sector, from the current MOP100,000.

But on Monday he told us: “I think the amount can go higher than that, and the existing 120-plus licensed gaming promoters would not be affected by this threshold [MOP50 million], if it’s really adopted by the authorities.”

Some of the city’s largest VIP gaming promotion investors – such as Suncity Group and Tak Chun Group – are “core members” of the association, Mr Kwok noted to us.

The trade body has yet to receive any definitive opinion from the local regulator regarding capital deposit requirements for entrant junkets, Mr Kwok noted.

“We’ve met with Paulo Martins Chan [gaming bureau director] before and told him our thoughts on the various issues regarding junket regulation, including the capital threshold,” Mr Kwok told us. “But so far we didn’t hear any conclusive feedback from him in respect to what the [proposed] revised law regulating junkets looks like.”

One suggestion that Mr Kwok’s group put to the casino regulator is to impose a licensing system for so-called junket “collaborators”. These are people that are not themselves licensed by the Macau government, but play a role in either bringing in VIP players, securing player credit, or arranging player payment on losses.

“We did also hear some of our industry peers proposing that there should be an escalating structure for the capital deposit for the new [junket] entrants depending on their financial condition, instead of a flat threshold,” Mr Kwok said. “But at this stage, I think everyone is just voicing their opinion – we are still waiting to see what the government decision is.”

(Updated at 9.55am, July 18)