ENG-2006 — Page 98

70 | Financial and Monetary Affairs

countries or the Mainland. Thirteen of the world's top 20 insurers are authorised to carry on insurance business in Hong Kong either directly or through a group company. There are 21 professional reinsurers, including most of the top reinsurers in the world. Gross premium income in 2005 was $137 billion.

The Hong Kong Monetary Authority (HKMA) worked with relevant government bureaux to foster a better understanding of Hong Kong's economic and financial strengths among international credit rating agencies. The efforts made contributed to a number of rating upgrades in 2006, putting Hong Kong in the AA category by all major international rating agencies the highest rating that has ever been assigned to Hong Kong. The rating and outlook upgrades reflected international recognition of Hong Kong's strong economic fundamentals as well as improved public finances and growth prospects.

Banking Sector

Main Features

Hong Kong maintains a three-tier system of deposit-taking institutions licensed banks, restricted licence banks and deposit-taking companies. They are collectively known as Als under the Banking Ordinance. The HKMA is the licensing authority for all three types of Als.

Only licensed banks may conduct full banking services, including in particular the provision of current and savings accounts and acceptance of deposits of any size and maturity. Restricted licence banks may take deposits of any maturity of $500,000 or above. Deposit-taking companies may take deposits of $100,000 or above with an original maturity of at least three months. Many deposit-taking companies are owned by, or otherwise associated with, licensed banks.

Hong Kong has one of the highest concentrations of banking institutions in the world. In December 2006, there were 138 licensed banks, 31 restricted licence banks and 33 deposit-taking companies, which included the operations of banks from 30 countries around the world. These 202 Als maintained an extensive network of 1 307 local branches. In addition, there were 84 representative offices of overseas banks in Hong Kong.

The total deposit liabilities of all Als to customers and the total loans and advances extended by these institutions at the end of 2006 were $4,766 billion and $2,468 billion respectively. The total assets of all Als amounted to $8,307 billion.

Hong Kong has a robust interbank payment system, which operates through the Real Time Gross Settlement (RTGS) system. The Hong Kong dollar RTGS system, which was launched in 1996, has a single-tier settlement structure, with all banks maintaining settlement accounts with the HKMA. All RTGS payment transactions are settled in real time across the books of the HKMA. Intraday liquidity can be obtained by the banks through the use of their Exchange Fund Bills and Notes (EFBNs) for intraday repurchase agreements with the HKMA.