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WEDNESDAY, JULY 7, 1993
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COMPLIANCE WITH THE BASLE CAPITAL ADEQUACY STANDARDS BY LOCALLY INCORPORATED INSTITUTIONS AT THE END OF 1989, THREE YEARS AHEAD OF THE TARGET FOR THE WORLD;
THE REFORM TO THE THREE-TIER SYSTEM IN 199L INTRODUCING THE CATEGORY OF RESTRICTED LICENCE BANKS TO REPLACE THE CATEGORY OF LICENSED DEPOSIT-TAKING COMPANIES;
AND MORE RECENTLY, THE INTRODUCTION OF REQUIREMENTS ENABLING THE SUPERVISORY AUTHORITY TO REQUIRE AUDITORS TO REPORT ON THE ADEQUACY OF THE INTERNAL CONTROL SYSTEMS OF AUTHORISED INSTITUTIONS.
THE
ON INSURANCE, THROUGH THE ESTABLISHED CONSULTATIVE MECHANISM OF GOVERNMENT'S INSURANCE ADVISORY COMMITTEE AND THE INDUSTRY'S HK FEDERATION OF INSURERS AND ASSOCIATED BODIES, A REGULATORY SYSTEM IS BEING DEVELOPED WITH THE AIM OF ENSURING THE INTEGRITY OF THE MARKET WHILST STILL PERMITTING MARKET FORCES TO DETERMINE PRICING AND RISK COVER. THE MAIN REGULATORY CONSIDERATIONS ARE THE SOLVENCY OF THE INSURERS AND 'THE PROTECTION OF POLICY- HOLDERS' INTERESTS. THE INSURANCE AUTHORITY WILL MONITOR AND SUPPLEMENT SELF-REGULATION BY THE INDUSTRY OF ITS BROKERS AND AGENTS WITHIN A FRAMEWORK OF SUPPORTIVE LEGISLATION.
ON SECURITIES AND FUTURES, THE MAIN CONSULTATIVE AND ADVISORY MECHANISM IS PROVIDED BY THE SECURITIES AND FUTURES COMMISSION (SFC) WHICH MAINTAINS VERY CLOSE CONTACT WITH MARKET PRACTITIONERS, THE STOCK EXCHANGE COUNCIL AND THE FUTURES EXCHANGE BOARD. MAJOR MARKET DEVELOPMENT MEASURES HAVE BEEN IDENTIFIED AND IMPLEMENTED SINCE THE STOCK MARKET CRASH OF 1987 SUCH AS THE ESTABLISHMENT ог THE SFC ITSELF, AS WELL AS THE CENTRAL CLEARING AND SETTLEMENT SYSTEM WHICH HAS GREATLY IMPROVED RISK MANAGEMENT AND THEREBY ENHANCED CONFIDENCE IN THE MARKET. THIS YEAR ALONE HAS SEEN IMPORTANT DEVELOPMENTS WITH THE LAUNCH OF INDEX OPTIONS TRADING ON THE FUTURES EXCHANGE AND THE ARRANGEMENTS FOR THE LISTING OF CHINESE STATE-OWNED ENTERPRISES ON THE STOCK EXCHANGE. FURTHER DEVELOPMENTS IN VIEW INCLUDE THE INTRODUCTION OF THE AUTOMATED ORDER-MATCHING AND EXECUTION SYSTEM AS WELL AS SHORT SELLING AND OPTIONS TRADING ON INDIVIDUAL SHARES ON THE STOCK EXCHANGE. GOVERNMENT HAS SPECIFICALLY SHOWN ITS SUPPORT WITH A FURTHER REDUCTION OF STAMP DUTY AND THE TRANSACTION LEVY. THE SECURITIES SECTOR OFFERS AN EXCELLENT ILLUSTRATION OF HOW GOVERNMENT AND THE PRIVATE SECTOR CAN AND DO CO-OPERATE TO PROVIDE A NECESSARY REGULATORY FRAMEWORK WITHOUT IMPEDING THE OPERATION OF MARKET FORCES.
ON
IN THE AREA OF COMPANIES REGULATION, THE STANDING COMMITTEE COMPANY LAW REFORM WAS ESTABLISHED IN 1984 TO ENSURE THAT THE LEGAL FRAMEWORK UNDER WHICH BUSINESS IS CONDUCTED IN HONG KONG FACILITATES THE OPERATION OF THE MARKET, WHILE PROVIDING A SET OF GROUND RULES THAT GIVE AN ESSENTIAL LEVEL OF CONFIDENCE TO INVESTORS, CREDITORS AND OTHER INTERESTED PARTIES. THE STANDING COMMITTEE IS COMPOSED CHIEFLY OF PRIVATE SECTOR PRACTITIONERS INCLUDING MEMBERS FROM BANKING, ACCOUNTANCY AND COMMERCIAL LAW, FROM THE COMPANY SECRETARIAL SECTOR AND THE STOCK EXCHANGE, IN ADDITION TO MEMBERS FROM THE REGULATORY AGENCIES. IT REPORTS ANNUALLY THROUGII ME TO THE GOVERNOR IN COUNCIL. THROUGH THIS MEANS THE COMPANIES REGULATORY FRAMEWORK IS KEPT UNDER CONSTANT REVIEW. THE VIEWS OF THE STANDING COMMITTEE ARE GIVEN CONSIDERABLE WEIGHT BY THE ADMINISTRATION. WE HAVE IMPLEMENTED OR ARE IN THE PROCESS OF IMPLEMENTING THE VAST MAJORITY OF ITS RECOMMENDATIONS.
/MR PRESIDENT,