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FINANCIAL AND MONETARY AFFAIRS
The Companies (Corporate Rescue) Bill, which was introduced into the Legislative Council in May 2001, aims to put in place a statutory corporate rescue procedure for companies in financial difficulty. The Legislative Council has set up a Bills Committee to examine the bill. In the light of the comments expressed by the Bills Committee, the Government has conducted a further round of consultation with concerned parties and is considering possible changes to certain provisions in the bill.
Professional Accountancy
Hong Kong had 21 835 registered professional accountants at year-end. Of these, 3 242 were certified public accountants (CPAs) or public accountants, who are in public practice and entitled to perform statutory audits. There were 1 099 CPA firms and 139 corporate practices registered at year-end.
The Hong Kong Society of Accountants (HKSA) is a self-regulatory body established under the Professional Accountants Ordinance with a wide range of responsibilities for registering professional accountants, maintaining accounting, auditing and ethical standards for the profession and conducting training programmes and examinations to qualify professional accountants.
In response to the Secretary for Financial Services and the Treasury's request in December 2002, the HKSA put forward proposals to reform the regulatory regime with the opening up of its governing body (the Council) and the two Disciplinary and Investigation Committees. The HKSA proposed that the latter two committees would in future comprise a majority of lay members. Action is in hand to amend the law to take forward the 'opening up' proposals. The HKSA also proposed the establishment of an Independent Investigation Board to tackle public interest cases. The Administration has published a consultation paper on this proposal in September 2003 and will decide the way forward in due course.
Monetary Policy
Hong Kong's monetary policy objective is to maintain currency stability. Given the highly externally oriented nature of the Hong Kong economy, this objective is further defined as a stable external value of the currency of Hong Kong, in terms of its exchange rate in the foreign exchange market against the US dollar at around HK$7.80 to US$1. This clear monetary policy objective is achieved through the linked exchange rate system, which was introduced in October 1983 after a nine-year period during which the Hong Kong dollar floated and the exchange rate was volatile.
The linked exchange rate system is characterised by currency board arrangements, requiring the Hong Kong dollar monetary base to be at least 100 per cent backed by, and changes in it to be 100 per cent matched by corresponding changes in, US dollar reserves held in the Exchange Fund at the fixed exchange rate of HK$7.80 to US$1. In Hong Kong, the monetary base includes the amount of currency notes and coins issued, the Aggregate Balance (which is the sum of the clearing balances of banks held with the HKMA for the purpose of effecting the clearing and settlement of transactions between banks themselves and also between the HKMA and banks), and the outstanding amount of Exchange Fund Bills and Notes.
Since the inception of the linked exchange rate system in October 1983, note-issuing banks are required to hold Certificates of Indebtedness (CIs) issued by the Exchange Fund to provide backing for bank note issuance. The issuance and redemption of CIs