On the international front, the authority continues to promote cooperation among central banks in the region, principally through the Executives' Meeting of East Asia-Pacific Central Banks (EMEAP)4, whose activities cover supervisory liaison and cooperation, development of financial markets and infrastructure, and various areas of central bank operations. The HKMA continues to participate in various regional and international forums for banking supervisors.
Recent Developments
In line with its policy of adhering closely to international regulatory standards, the HKMA is committed to adopting the new capital adequacy framework. promulgated by the Basel Committee on Banking Supervision (commonly referred to as Basel II) from January 2007 in accordance with the committee timetable. In view of the complexity of Basel II, the HKMA has been working closely with the industry to ensure that the implementation approach is both practicable and appropriate for Hong Kong. To this end, it has been issuing detailed implementation proposals since August 2004 for public consultation. The proposals were well received by the banking industry and the policy setting stage was largely completed in 2005. The Banking (Amendment) Ordinance 2005 was enacted on July 6, 2005 to provide for the implementation of Basel II requirements in Hong Kong through capital and disclosure rules to be issued by the Monetary Authority under the Ordinance. Recognising the importance of cross-border supervisory cooperation to the implementation of Basel li, the HKMA will continue to interact with overseas supervisors through the exchange of views and experience on relevant practical issues.
The HKMA continued with its efforts to enhance the supervisory framework for the prevention of money laundering and terrorist financing. The revised Supplement to the existing guideline on Prevention of Money Laundering, together with a set of Interpretative Notes, issued in June 2004 have fully incorporated the international standards in the area.
The HKMA continued to work closely with the SFC on the implementation of the new securities regulatory framework, which aims, among other things, to uphold a level playing field between banks and non-bank financial intermediaries in the securities market. In 2005, the two regulators held two meetings in accordance with the arrangements set out in the Memorandum of Understanding (MOU) between them. During the year, the HKMA continued to perform its enforcement function under the securities regulatory regime. In 2005, the Banking Ordinance was amended to empower the HKMA to disclose relevant details of any disciplinary action taken. The HKMA's enforcement approach remains consistent with that of the SFC, which ensures that action taken against individuals and executive officers of registered institutions uses the same yardstick as that for licensed individuals who are supervised by the SFC.
4
The EMEAP Group comprises 11 central banks and monetary authorities in the East Asia and Pacific region: Reserve Bank of Australia, People's Bank of China, Hong Kong Monetary Authority, Bank Indonesia, Bank of Japan, Bank of Korea, Bank Negara Malaysia, Reserve Bank of New Zealand, Bangko Sentral ng Pilipinas, Monetary Authority of Singapore and Bank of Thailand.