ENG-1996 — Page 106

6 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 368 authorised institutions and local representative offices of banks from more than 40 countries conduct business under the Banking Ordinance. The presence of 80 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 1996, up from sixth in 1992, according to a global survey conducted by the Bank for International Settlements (BIS).

Hong Kong's stock market is the second-largest in Asia after Tokyo and the tenth- largest in the world. 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 13 451.45 was 34.42 per cent higher than a year earlier.

In 1996, Hong Kong took further steps to improve the transparency of the banking sector. Further financial disclosure packages were developed. A Code of Banking Practice, which aims to improve the standard and transparency in the provision of banking services, also was developed.

A mortgage corporation to be initially owned by the government through the Exchange Fund with a capital base of $1 billion will be established in 1997. The decision to go ahead was made following a consultation exercise by the Hong Kong Monetary Authority (HKMA) that ended in mid-June. The establishment of a mortgage corporation will help promote banking and monetary stability and facilitate the development of a secondary mortgage market in Hong Kong.

To maintain and enhance Hong Kong's status as an international financial centre, the HKMA has worked closely with the banking community to develop an efficient and robust payment system in Hong Kong. In December, Hong Kong's interbank payment system moved to Real Time Gross Settlement under which settlement risks in the banking system has been considerably reduced.

The HKMA became a shareholder and member of BIS in November 1996. The invitation to join the BIS is a clear recognition of Hong Kong's status as a leading and autonomous international financial centre and Hong Kong's increasingly active role in co-operation among central banks. The fact that the People's Bank of China, China's central bank, was separately invited to join the BIS shows that the