XN000022-1996-02-07 — Page 24

6

The third area referred to by both members relates to a sound regulatory framework and legal requirements to ensure that the financial markets operate fairly and efficiently, thus improving the protection of investors. I should reiterate that Government is again fully committed to this, and over the years this has indeed been one of our primary objectives. We recognise that the integrity and effectiveness of the financial services regulatory regime is of utmost importance to our financial markets. The system must be fair and transparent so as to inspire confidence of market practitioners and investors. Hong Kong has always sought to adopt the leading international prudential standards so as to protect the interests of depositors, shareholders, insurance policy-holders, members of registered retirement schemes, and so on. and regular reviews of the relevant legislation, e.g. the Banking Ordinance, Insurance Companies Ordinance and securities and futures legislation have resulted in a number of amendment legislation and subsidiary legislation which have contributed to the continued robustness and effectiveness of our regulatory system. Nevertheless, without compromising our supervisory regime, we also strive to ensure that the system is as market-friendly as possible, and to be ever vigilant regarding over-regulation,

Several members have sounded a very important warning that we should be extremely worried about over-regulation. I am very grateful for this reminder. Indeed, the Government and the financial services regulators must always be mindful of the impact of over-regulation which undermines the attractiveness and competitiveness of our market. However, at the same time, we must be mindful that the primary objective of our financial services regulations is to protect the interest of the investors. To live up to its reputation as a leading international financial centre, Hong Kong financial services regulatory system must measure up to international standard which is a form of quality control, if you like, of the high quality products we are trying to sell. It is essential, therefore, that Hong Kong adheres to the high industrial standards set by international bodies. What is involved therefore is a balancing act to enhance market friendliness without promising the robustness and effectiveness of our regulatory system. To this end, Government is committed to review regularly our regulatory requirements so as to ensure that they continue to be sound and effective in the face of rapidly changing environment, but also to streamline procedures and lessen the reporting burden wherever appropriate and to ensure that the criteria for authorisation and reporting requirements of Hong Kong's regulatory regime are objective and transparent. Examples of lessening the regulatory burden in recent years include the promotion of self-regulation e.g. in the insurance industry and in the streamlining of listing securities by vesting more power in the stock exchange of Hong Kong from the Securities and Futures Commission and we shall continue such endeavour. And talking about the stock exchange and the SFC, I note, Mr Chim by now categorically strong, and passionate feeling for the SFC which I am sure will take careful note of the view from one of its most ardent critics. I also note that market development is in fact a statutory responsibility of the SFC. But I also accept that the role of market development should rest primarily with the market and the industry concerned.