ENG-2008 — Page 113

Financial and Monetary Affairs | 69

Through its integration with the RTGS systems in Hong Kong, the CMU enables securities to be settled on a delivery-versus-payment (DvP) basis, thereby enhancing settlement efficiency and eliminating settlement risk. The interface also enables automatic intraday repurchase agreements to provide intraday liquidity to participants in the RTGS systems.

The Clearing and Settlement Systems Ordinance empowers the Monetary Authority to designate and oversee clearing and settlement systems that are material to the monetary or financial stability of Hong Kong or to the functioning of Hong Kong as an international financial centre. The CMU, the Hong Kong dollar Clearing House Automated Transfer System (CHATS), the US dollar CHATS, the Euro CHATS, the Renminbi CHATS and the Continuous Linked Settlement System have been designated under the Ordinance. Each system was issued a certificate of finality, which provides statutory backing to the finality of settlement for transactions made through the system. The HKMA found all designated systems to be continuously in compliance with the Ordinance.

Hong Kong Monetary Authority

The HKMA was established on April 1, 1993 after the Legislative Council passed amendments to the Exchange Fund Ordinance in 1992 empowering the Financial Secretary to appoint a Monetary Authority.

Its policy objectives are to maintain currency stability within the framework of the Linked Exchange Rate system through sound management of the Exchange Fund, monetary policy operations and other means deemed necessary; promote safety and stability of the banking system through the regulation of banking business, the business of taking deposits and the supervision of Als and promote efficiency, integrity and development of the financial system, particularly payment and settlement arrangements.

The HKMA is an integral part of the Government, but can employ staff on terms that differ from those of the civil service to attract personnel of the appropriate experience and expertise. Its staff and operating costs are charged directly to the Exchange Fund instead of the general revenue. The HKMA is accountable to the Financial Secretary, who is advised by the Exchange Fund Advisory Committee (EFAC) on matters relating to the control of the Exchange Fund.

The authority seeks advice on policy matters routinely from the Banking Advisory Committee and the Deposit-taking Companies Advisory Committee. Both committees are established under the Banking Ordinance. They are chaired by the Financial Secretary and comprise members from the banking industry and other relevant professions.

The Banking Ordinance provides the legal framework for banking supervision in Hong Kong. Under the ordinance, the HKMA is the licensing authority responsible. for granting and revoking the authorisation of all Als, and the approval and revocation of money broker licences. The HKMA seeks to maintain a regulatory framework that is fully in line with international standards. The aim is to devise a prudential supervisory system to help preserve the general stability and effective