FINANCIAL AND MONETARY AFFAIRS
confidence of the people of Hong Kong and the international financial community, the government announced its decision in October 1992 to seek to establish a Hong Kong Monetary Authority (HKMA). It is planned that the HKMA will be formed by merging the Office of the Exchange Fund with the Office of the Commissioner of Banking and headed by a Chief Executive. The use and management of the Exchange Fund would remain the statutory responsibility of the Financial Secretary although he would delegate his authority to the senior staff of the HKMA as appropriate.
The HKMA would be an integral part of the government and it would initially be staffed mainly by civil servants. The HKMA would, though, be able to employ staff on terms different from those of the civil service in order to attract personnel of the right calibre, experience and expertise. The staff and operating costs of the HKMA would be charged directly to the Exchange Fund instead of to the general revenue, thus taking the HKMA outside the resource allocation constraints of other government departments.
The HKMA would be responsible for the development and execution of monetary policy; overseeing operation of both the money and foreign exchange markets and carrying out money market operations, whenever there is a need to do so, to maintain stability in the market; managing the assets of the Exchange Fund; developing the financial markets in Hong Kong; running the market for government debt; and supervising authorised institutions under the Banking Ordinance. The establishment of the HKMA would not entail the assumption of further central banking functions by the government. There is neither the need nor intention for the two residual central banking roles (i.e. bank notes issue and cheque clearing) to be assumed by the new body.
The HKMA would be accountable to the Financial Secretary, who would continue to be advised by the Exchange Fund Advisory Committee on matters relating to the control of the Exchange Fund. But reinforcing a trend over recent years, the involvement of the committee in monetary and investment matters would become much closer and the committee would function very much like a management board, including advising the Financial Secretary on the annual budget of the HKMA. To reflect the wider ambit of the fund and the increased responsibility of the committee, the membership of the committee would be suitably expanded to include additional distinguished members of the financial and related sectors.
The Exchange Fund (Amendment) Ordinance 1992 providing for the establishment of the Monetary Authority was enacted on December 10, 1992. The ordinance also gave statutory recognition to the monetary policy objectives of Hong Kong. Apart from the primary use of the Exchange Fund to affect the Hong Kong dollar exchange rate, the ordinance made clear that the Financial Secretary could use the Exchange Fund to maintain the stability and the integrity of the monetary and financial systems of Hong Kong, with a view to maintaining Hong Kong as an international financial centre. This secondary purpose would be subordinate to the primary purpose of affecting the exchange value of the Hong Kong dollar. Should there be any conflict, the primary purpose would prevail.
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