FINANCIAL AND MONETARY AFFAIRS
1997 to advise the HKMA on various matters in connection with the development of electronic banking in Hong Kong. To date, the HKMA has issued three circular letters to all authorised institutions, drawing their attention to the HKMA's views on various security and risk management issues regarding the provision of electronic banking services. The Study Group has also studied how the electronic security infrastructure and legal framework might be enhanced to assist the development of electronic banking in Hong Kong. The HKMA will continue to work closely with the relevant departments of the government and other private parties in this regard.
The HKMA has continued its efforts to increase the transparency of the banking sector by improving the level of financial disclosure by authorised institutions. The HKMA has recommended further disclosure measures in respect of the 1998 accounts, aimed primarily at improving disclosure on asset quality. In particular, a more detailed breakdown of the loan portfolio with regard to overdue and rescheduled loans is recommended. The disclosure requirements in respect of the Year 2000 problem have also been revised to bring them in line with those set out by the SEHK for listed companies.
The HKMA has also addressed the issue of the lack of disclosure by overseas incorporated authorised institutions. Beginning with financial years ending on or after December 31, 1998, overseas incorporated authorised institutions will be required to disclose certain financial information regarding their operations in Hong Kong and publish this information in the form of a Disclosure Statement. The information required to be disclosed includes that relating to advances and deposit taking activities of the institution as well as the asset quality of the institution's loan portfolio.
The trend in the banking industry to diversify the lending portfolio from asset backed loans into unsecured loans such as credit cards and personal loans will affect credit risk of authorised institutions in Hong Kong. Although credit reference agencies exist in Hong Kong, not all banks have utilised their services and the amount of information they possess has been limited. The HKMA considers that the development of a fully-fledged credit reference agency in Hong Kong would provide authorised institutions with better means to manage their credit risk. Accordingly, in March 1998, the HKMA issued a circular letter to all authorised institutions recommending that they participate in the use and sharing of credit information through a credit reference agency. The use of such information would be subject to the Code of Practice on Consumer Credit Data issued by the Office of the Privacy Commissioner for Personal Data.
The HKMA will continue to monitor the effectiveness of the credit reference service in Hong Kong, particularly with respect to the amount of credit information. disclosed to credit reference agencies and level of participation in sharing credit information by authorised institutions.
Pursuant to the Memorandum of Understanding signed between the HKMA and the Securities and Futures Commission (SFC) in October 1995, the two authorities continued in 1998 to strengthen co-operation to ensure that there will be no gaps in regulation and to minimise unnecessary duplication of effort in their supervision. Regular meetings were held between the two authorities to discuss policy matters and supervisory issues relating to institutions in which they both have an interest.
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