ENG-2007 — Page 112

72 | Financial and Monetary Affairs

by the Basel Committee on Banking Supervision (commonly referred to as Basel II). Banking (Capital) Rules and Banking (Disclosure) Rules have been made by the Monetary Authority under the Banking Ordinance to bring the capital adequacy and disclosure requirements in line with the recommendations of the Basel Committee.

The HKMA has taken various initiatives to further strengthen the supervisory framework for the prevention of money laundering and terrorist financing. An Industry Working Group established in 2006 published guidance papers on cases involving politically exposed persons, customer due diligence for off-shore companies. and address proof for personal customers.

The HKMA continued to work closely with the SFC to ensure that both banks and non-bank financial intermediaries are subject to consistent regulatory measure under the securities regulatory framework. A reciprocal secondment programme between the HKMA and the SFC was established to promote communication and consistency in enforcement.

During the year, the HKMA continued to assist the operations of the Hong Kong Deposit Protection Board, which launched the Deposit Protection Scheme in September 2006 to provide compensation of up to $100,000 to eligible depositors in the event of a bank failure.

One of the functions of the HKMA is to promote and encourage high standards of conduct and sound and prudent business practices among Als, primarily by way of the Code of Banking Practice. The code is issued by the industry associations and endorsed by the HKMA. It sets out the minimum standards to be followed by Als in their dealings with personal customers. The code is reviewed from time to time by the Code of Banking Practice Committee, which is convened by the industry associations.

Securities and Futures Sector

Main Features

The securities market in Hong Kong is operated by the SEHK and futures market, the Hong Kong Futures Exchange Limited (HKFE), both being wholly owned subsidiaries of the Hong Kong Exchanges and Clearing Limited (HKEX). At year-end, there were 477 exchange participants on the SEHK and 140 exchange participants on the HKFE.

By the end of 2007, there were 1 241 companies listed on the Main Board and the Growth Enterprises Market (GEM) of the SEHK with a total market capitalisation of about $20,698 billion, raising an aggregate of $558.5 billion during the year. The total turnover of the securities market amounted to $21,666 billion.

New products continued to be launched during the year. The first retail Islamic fund and a number of UCITS III funds (funds domiciled in the European Union states. which are governed by the Undertakings of Collective Investment in Transferable Securities III issued by the European Commission) adopting non-traditional investment strategies were authorised for offering to the public. Additional Exchange Traded Funds (ETFs) on world, regional and Mainland indices and commodities were