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Financial and Monetary Affairs
developments in the MPF System and education on MPF investments. The MPFA is also the Registrar of Occupational Retirement Schemes.
Financial Reporting Council
The Financial Reporting Council (FRC) is a statutory body. The Financial Reporting Council (Amendment) Ordinance 2019 was enacted in January and the new auditor regulatory regime began on 1 October, making the FRC the full-fledged independent auditor regulator of Hong Kong. It is vested with direct powers of inspection, investigation and discipline concerning auditors of Hong Kong-listed entities, recognition of overseas auditors of listed entities and oversight of the performance of the Hong Kong Institute of Certified Public Accountants (HKICPA). The expanded scope of statutory duties puts the FRC on a strong footing to uphold the quality of the financial reporting of listed entities in Hong Kong and enhance investor protection. In 2019, the council completed 12 investigations and three enquiries.
Cross-regulator Coordination
The government maintains regular dialogue with financial regulators through established platforms such as the Council of Financial Regulators chaired by the Financial Secretary, and the Financial Stability Committee chaired by the Secretary for Financial Services and the Treasury. These cross-sectoral platforms work towards the common objective of promoting efficiency and effectiveness in the regulation and supervision of financial institutions, and maintaining financial stability in Hong Kong. The government also holds meetings with regulators to discuss regulatory and supervisory issues and monitor the financial markets.
Monetary Policy
The objective of Hong Kong's monetary policy is currency stability, defined as a stable external exchange value of the Hong Kong dollar (HKD), in terms of its exchange rate in the forex market against the US dollar (USD), at around HK$7.80 to US$1. This objective is achieved through the Linked Exchange Rate System, introduced in 1983. The government is fully committed to maintaining this system, which is a cornerstone of Hong Kong's monetary and financial stability, and observing the strict discipline of the system's currency board arrangements.
The system is characterised by currency board arrangements requiring the HKD 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 - USD 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 balance2 and the outstanding amount of Exchange Fund Bills and Notes (EFBNs). Under the currency board system, HKD exchange rate stability is maintained through an interest rate adjustment mechanism and the HKMA's commitment to honour Convertibility Undertakings. In particular, the HKMA undertakes to buy USD from licensed banks. at HK$7.75 to US$1 (strong-side Convertibility Undertaking) and sell USD at HK$7.85 to US$1
2
Aggregate balance is the sum of the clearing balances of banks held with the HKMA for the purpose of effecting the clearing and settlement of transactions among the banks themselves and also between the HKMA and banks.
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