4.
Financial and Monetary Affairs
Mainland and Hong Kong Closer Economic Partnership Arrangement
The Closer Economic Partnership Arrangement (CEPA) gives Hong Kong's financial service providers and professionals greater market access and flexibility in their Mainland operations. It also enhances Hong Kong's attractiveness to market users and strengthens the city's competitiveness as an international financial centre and the premier capital formation centre for Mainland enterprises.
The Agreement on Trade in Services, signed in 2015 under the CEPA framework, was implemented on 1 June 2016. The agreement basically achieves liberalisation of trade in services between the Mainland and Hong Kong, including accounting, insurance, securities and banking.
Banking
Hong Kong maintains three tiers of deposit-taking institutions: licensed banks (LBs), restricted licence banks (RLBs) and deposit-taking companies (DTCs)9. They are known collectively as authorised institutions (Als) under the Banking Ordinance and are licensed by the HKMA.
The city has one of the world's highest concentrations of banking institutions. At the end of 2016, there were 156 LBS, 22 RLBS and 17 DTCs. These 195 Als maintained a network of 1,289 local branches. There were also 54 representative offices of banks incorporated outside Hong Kong.
Hong Kong Monetary Authority
The HKMA's main functions 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; to promote stability and integrity of the financial system, including the banking system; to help maintain Hong Kong's status as an international financial centre, including the maintenance and development of Hong Kong's financial infrastructure, and to manage the Exchange Fund.
The HKMA is an integral part of the government, but operates with a high degree of autonomy complemented by a high degree of accountability and transparency, and can employ people on terms different from those of the civil service to attract personnel of suitable experience and expertise. It is accountable to the Financial Secretary, who is advised by the Exchange Fund Advisory Committee in control of the Exchange Fund.
The Banking Advisory Committee and Deposit-taking Companies Advisory Committee are established under the Banking Ordinance to advise on policy matters. They are chaired by the Financial Secretary and comprise members from banking and other professions.
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 preserve the stability and
9
Only LBS may conduct full banking services, including the provision of current and savings accounts and acceptance of deposits of any size and maturity. RLBS may take deposits of any maturity of $500,000 or above. DTCs may take deposits of $100,000 or above with an original maturity of at least three months.
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