FINANCIAL AND MONETARY AFFAIRS
The HKMA is an integral part of the Government, but can employ staff on terms different from those of the Civil Service to attract personnel of the appropriate experience and expertise. Its staff and operating costs are charged directly to the Exchange Fund instead of the general revenue. The HKMA is accountable to the Financial Secretary, who is advised by the Exchange Fund Advisory Committee on matters relating to the control of the Exchange Fund.
The HKMA seeks advice on policy matters routinely from the Banking Advisory Committee and Deposit-taking Companies Advisory Committee. Both committees are established under the Banking Ordinance. They are chaired by the Financial Secretary and comprise members from the banking industry and other relevant professions. Members of the committees are appointed by the Financial Secretary under the delegated authority conferred by the Chief Executive.
The Banking Ordinance provides the legal framework for banking supervision in Hong Kong. Under the ordinance, the HKMA is the licensing authority responsible for the authorisation and revocation of all authorised institutions, as well as the approval and revocation of money broker licences. The HKMA seeks to maintain a regulatory framework that is fully in line with international standards, primarily those recommended by the Basel Committee on Banking Supervision. The objective is to devise a prudential supervisory system to help preserve the general stability and effective working of the banking system while at the same time providing sufficient flexibility for authorised institutions to take commercial decisions. Hong Kong's framework of banking supervision is in line with the Core Principles for Effective Banking Supervision promulgated by the Basel Committee.
The HKMA's supervisory approach is based on a policy of 'continuous supervision' through a combination of on-site examinations, off-site reviews, prudential meetings, co-operation with external auditors and meetings with boards of directors. In 2000, the HKMA implemented a risk-based supervisory framework for a number of small to medium-sized local banks. This approach puts emphasis on evaluation of the quality of risk management practices and internal controls in respect of various types of risks faced by authorised institutions. The framework was extended to large local banks and some foreign banks in 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. In addition, Hong Kong is a member of the Financial Action Task Force (FATF), an inter-governmental body with the objective of developing and promoting legal, law enforcement and financial regulation policies to combat money laundering. Hong Kong is the President of the FATF for the period from July 2001 to June 2002.
Developments in Recent Years
The Banking (Amendment) Bill 2000 proposes amendments to the Banking Ordinance corresponding to the proposals of the Securities and Futures Bill. It aims at enhancing the regulatory framework for the securities business conducted by authorised institutions and bringing it in line with the regulatory standards applicable
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