ENG-1995 — Page 99

FINANCIAL AND MONETARY AFFAIRS

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HONG KONG's financial sector comprises an integrated network of institutions and markets which, under a market-friendly form of regulation, provide a wide range of products and services to local and international customers and investors.

Some 549 authorised institutions and local representative offices of banks from more than 40 countries conduct business under the Banking Ordinance. The presence of 85 of the world's top 100 banks has helped promote the territory as an inter- national financial centre. The banking sector's external assets are among the highest in the world. Hong Kong was the fifth-largest centre for foreign exchange trading in 1995, up from sixth in 1992, according to a global survey conducted by the Bank for International Settlements.

Hong Kong's stock market is the second-largest in Asia after Tokyo. Buoyed by the bullish performance of the world's major stock markets, the Hang Seng Index closed higher at the end of the year. The closing index of 10 073 was 23 per cent higher than

year ago.

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In 1995, Hong Kong took further steps to improve the transparency of financial reporting by the authorised institutions. Discussions continued between the Hong Kong Monetary Authority (HKMA), the Stock Exchange of Hong Kong Limited (SEHK) and the Securities and Futures Commission (SFC) and further recom- mendations for disclosure in the 1995 accounts of authorised institutions were issued, including the disclosure of balance sheet inner reserves.

In July 1995, the Finance Committee of the Legislative Council approved a budget of $485 million to meet the cost of holding the World Bank/International Monetary Fund Annual Meetings in Hong Kong in 1997.

The Interest Rate Rules of the Hong Kong Association of Banks were partially lifted when the association removed the interest rate cap on Hong Kong dollar time deposits fixed for more than one month and those fixed for more than seven days on October 1, 1994 and January 3, 1995, respectively. In September 1995, it was announced that the third phase of deregulation should proceed to cover Hong Kong dollar deposits fixed for seven days or with a call or notice period of seven days and that the current programme of deregulation should then come to an end. This was a cautious approach adopted to strike a balance between liberalisation and prudence.

Financial Institutions

Hong Kong maintains a three-tier system of deposit-taking institutions licensed banks, restricted-licence banks and deposit-taking companies which are collec- tively called authorised institutions. Under the Banking Amendment Ordinance