Financial and Monetary Affairs | 81
Hong Kong Monetary Authority
The HKMA was established on April 1, 1993 after the Legislative Council passed amendments to the Exchange Fund Ordinance in 1992 empowering the Financial Secretary to appoint a Monetary Authority.
Its policy objectives are to maintain currency stability within the framework of the Linked Exchange Rate system through sound management of the Exchange Fund, monetary policy operations and other means deemed necessary; promote safety and stability of the banking system through the regulation of banking business, the business of taking deposits and the supervision of Als and promote efficiency, integrity and development of the financial system, particularly payment and settlement arrangements.
The HKMA is an integral part of the Government, but can employ staff on terms that differ 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 (EFAC) on investment policies and strategies for the Exchange Fund and on projects that are charged to the Exchange Fund, such as the development of financial infrastructure.
The Banking Advisory Committee and the Deposit-taking Companies Advisory Committee are established under the Banking Ordinance to give advice on relevant policy matters. They are chaired by the Financial Secretary and comprise members from the banking industry and other professions.
The Banking Ordinance provides the legal framework for banking supervision in Hong Kong. Under the ordinance, the HKMA is the licensing authority responsible for granting and revoking the authorisation of all Als, and the approval and revocation of money broker licences. The HKMA seeks to maintain a regulatory framework that is fully in line with international standards. The aim is to devise a prudential supervisory system to help preserve the general stability and effective operation of the banking system, while at the same time providing sufficient flexibility for Als to make commercial decisions.
Hong Kong's framework of banking supervision is in line with the Core Principles for Effective Banking Supervision issued by the Basel Committee on Banking Supervision. In June 2009, at the invitation of the Basel Committee, Hong Kong became one of its members. The HKMA also participates in a number of international and regional initiatives and forums for banking supervisors.
Recent Developments
Hong Kong's banking sector managed to weather the challenges of the global financial crisis, ending the year with sound capital and liquidity positions. Further steps were taken by the HKMA to implement international initiatives to strengthen banks' capital, liquidity and other risk management standards; and Als introduced improved measures on investor protection.