FINANCIAL AND MONETARY AFFAIRS
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promoting banking sector stability. From the responses received, there appears to be general support from the banking and corporate sectors for the idea of establishing a CCRA. The HKMA has convened a working group with representatives from the banking and corporate sectors to study the implementation issues in greater detail before making any firm recommendations.
A consultation paper on enhancing deposit protection in Hong Kong was issued in October following completion of an independent consultancy study on this subject. The study aimed at making a fair and objective assessment of deposit protection in Hong Kong based on independent evaluation with due regard to international practices and local conditions. The study found that the best protection for small depositors would be achieved with an insurance-based system, with features of liquidity and credibility that are necessary to make deposit protection effective. The consultation would be concluded in January 2001.
Other major initiatives contained in the Banking Sector Reform Programme include a review of the existing market entry requirements for a local banking licence and a review of the three-tier licensing system. There are also ongoing efforts to improve financial disclosure standards and promote higher standards of corporate governance.
Electronic banking and the adoption of new technology in general is one of the key strategic challenges facing Hong Kong's banking sector. The year saw a number of electronic banking initiatives in Hong Kong. The majority of retail banks in Hong Kong have already introduced Internet banking services. Given the rapid pace of development in this area, the HKMA has stepped up its efforts to ensure that the regulatory framework continues to evolve and keep pace with technological developments. The HKMA has established a specialist electronic banking team and developed a risk-based framework for conducting more focused examinations of the electronic banking activities and general information technology controls of banks. Two guidance notes were issued to provide authorised institutions with recommendations on security aspects of electronic banking. A guideline was also issued on the authorisation of virtual banks that deliver banking services primarily through the Internet or other electronic delivery channels.
One of the functions of the HKMA is to promote and encourage high standards of conduct and sound and prudent business practices among authorised institutions. This is important to maintain public confidence and trust in the banking system. In October, the HKMA released a set of proposals aimed at enhancing the business practices of authorised institutions in the provision of credit card services. The proposals, which were formulated by an informal working group to review the Code of Banking Practice convened by the HKMA and comprising representatives from the banking industry, would be finalised and promulgated in January 2001. Further recommendations in relation to other business areas are being proposed as the review of the code continues, which is expected to be completed by the first quarter of 2001. On the international front, the HKMA continues to promote co-operation among central banks in the region, principally through the Executives' Meeting of East Asia- 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 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