Macau seeks to raise capital requirements

If approved, the decision would result in further downfall of VIP gambling in Macau.

Junker operators face an increase of 100 percent in their capital requirements.

Macau.- The Macau government has announced a new proposal, which aims to increase the capital requirements of junket operators by one hundred percent.

If this proposal is approved, it will raise the capital requirement from around US$1.3 million to US$13. In addition, one shareholder from the junket operation ought to be a Macau resident. These regulations would only be applicable to new junket operators, not existing ones.

Beijing’s anti-corruption crackdown resulted in the collapse of the VIP gambling segment and negatively affected junket operators. After junket operators lost their VIP clientele, they also found it difficult to collect their VIP clients’ debts as they decided to avoid Macau’s casinos.

With the gambling hub’s current situation it seems highly unlikely that new junkets will apply for licenses, as the Macau government has encouraged casinos to stop focusing on the VIP segment to diversify their gaming and non-gaming portfolio instead. New casinos on the Cotai strip have significantly reduced their VIP gaming room area, which resulted in shrinking junket operators’ business as well.

“The current situation is like the aftershocks following an earthquake. After some time, some VIP rooms may have seen the number of customers that they receive is not enough to support their operations” stated Kwok Chi-chung, president of Macau’s Association of Gaming & Entertainment Promoters. “As such, they may prefer shifting some of their resources and focuses from Macau to other places in order to decrease their operational costs here.”

After a number of junket thefts, these operators have fallen out of grace. Clearly, the new proposal on raising capital requirements is yet another attempt made by Macau’s government to tighten regulations on the segment.