68 Financial and Monetary Affairs
The Hong Kong Monetary Authority (HKMA) worked with relevant government bureaux to foster a better understanding of Hong Kong's economic and financial strengths among international credit rating agencies. Standard & Poor's and Rating and Investment Information Incorporation raised Hong Kong's sovereign credit rating from 'AA' to 'AA+' in 2008, which is the highest rating ever assigned to Hong Kong. The upgrade reflected international recognition of Hong Kong's strong economic fundamentals, as well as improved public finances and growth prospects.
Banking Sector
Main Features
Hong Kong maintains a three-tier system of deposit-taking institutions licensed banks, restricted licence banks and deposit-taking companies. They are collectively known as authorised institutions (Als) under the Banking Ordinance. The HKMA is the licensing authority for all three types of Als.
Only licensed banks may conduct full banking services, including in particular the provision of current and savings accounts and acceptance of deposits of any size and maturity. Restricted licence banks may take deposits of any maturity of $500,000 or above. Deposit-taking companies may take deposits of $100,000 or above with an original maturity of at least three months. Many deposit-taking companies are owned by, or otherwise associated with, licensed banks.
Hong Kong has one of the highest concentrations of banking institutions in the world. At the end of 2008, there were 145 licensed banks, 27 restricted licence banks and 28 deposit-taking companies. These 200 Als maintained an extensive network of
of more than 1 300 local branches. In addition, there were 71 representative offices of overseas banks in Hong Kong.
The total deposit liabilities of all Als to customers and the total loans and advances extended by these institutions at the end of 2008 were $6 060 billion and $3 284 billion respectively. The total assets of all Als amounted to $10 726 billion.
Hong Kong has a robust interbank payment system, which operates through the Real Time Gross Settlement (RTGS) system. All banks in Hong Kong maintain settlement accounts with the HKMA through the Hong Kong dollar RTGS system. All RTGS payment transactions are settled in real time across the books of the HKMA. Intraday liquidity can be obtained by the banks through the use of their Exchange Fund Bills and Notes (EFBNs) for intraday repurchase agreements with the HKMA.
The US dollar, Euro and Renminbi RTGS systems provide real-time settlement services for transactions in these currencies, thereby reducing or eliminating settlement risk. RTGS systems in Hong Kong are linked to provide settlement services for foreign exchange transactions on a payment-versus-payment (PvP) basis.
The HKMA operates the Central MoneyMarkets Unit (CMU) to provide clearing and custodian services for EFBNs and other Hong Kong dollar or foreign currency private debt securities. It is linked with a number of international and regional central securities depositories to enable overseas investors to trade CMU securities.