FINANCIAL AND MONETARY AFFAIRS
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The HKMA became a member of the BIS in November 1996 in recognition of the size of Hong Kong's financial markets and its contribution to international monetary co-operation. As a member of the BIS, the HKMA participates more fully in BIS activities and policy discussions. The People's Bank of China is also a member, which clearly shows that the international financial community is supportive of the 'One Country, Two Systems' principle enshrined in the Joint Declaration and the Basic Law.
In 1998, the HKMA continued to promote co-operation among central banks in the region, principally through the Executives' Meeting of East Asia and Pacific Central Banks (EMEAP), whose activities cover supervisory liaison and co- operation, development of financial markets and infrastructure, and various areas of central bank operations. The HKMA has chaired a study group (now redesignated as a Working Group) on banking supervision since its establishment in August 1996 under the direction of the EMEAP. The group comprises experts in banking supervision from EMEAP members and meets on a half-yearly basis to hold discussions in areas of mutual interest. It also conducts research and analysis on banking supervisory issues with a view to improving the understanding of such issues. in the region.
The HKMA participated, for the fourth time, in the triennial global survey of foreign exchange and derivative activity conducted by the BIS in April 1998. The preliminary results indicated that, although there was a decline in the volume of transactions, Hong Kong remained a major centre for foreign exchange and derivatives.
Hong Kong is a member of the Financial Action Task Force (FATF), an international organisation of 26 governments and two international organisations with a mandate to encourage international efforts in the fight against money laundering. To help combat money laundering, a revised Guideline on Prevention of Money Laundering was issued by the HKMA under section 7(3) of the Banking Ordinance on October 17, 1997. It replaced the previous guideline on this subject issued in July 1993. It has taken into account the latest legislative changes on money laundering in Hong Kong as well as the stocktaking review of the 40 recommendations by FATF. In particular, the customer identification requirements have been significantly strengthened with new provisions incorporated in relation to shell companies, trust and nominee accounts and other types of intermediaries.
In 1998, the government proposed legislation to provide certainty for the continuity of contracts in Hong Kong upon the introduction of the Euro. The legislation, which is similar to that enacted in the European Union and New York State, was fully supported by the financial sector in Hong Kong and passed into law at the year end.
The Banking Ordinance provides a legal framework for the regulation of the issue of multi-purpose stored value cards (MPCs) and approval and regulation of money brokers. The legal framework generally provides that the issue of general purpose MPCs should be confined to licensed banks (which are the only entities having access to the payment system). A special purpose vehicle whose principal business is to issue, or facilitate the issue of MPCs may be authorised as a deposit-taking company for the purpose. Discretion is available also for the Monetary Authority to exempt a stored value card (SVC), or a class of cards, from being a MPC where the core use of the card is limited and specified, and the risk to the payment system and cardholders is