ENG-2010 — Page 134

92 | Financial and Monetary Affairs

financial reporting, auditing and ethical standards for the profession; and conducting training programmes and qualifying examinations.

Numbers of CPAs, CPA firms and corporate practices in Hong Kong:

2008

2009

2010

No. of CPA, including CPA (Practising)

No. of CPA (Practising)

No. of firms of CPA (Practising)

27 884

29 107

30 817

3 679

3 749

3 784

1 176

1 198

1 217

254

291

336

No. of corporate practices

The Hong Kong Financial Reporting Standards, issued by the HKICPA, have converged with the International Financial Reporting Standards (IFRS). This convergence is beneficial to Hong Kong because international investors and financial analysts are well acquainted with IFRS.

Monetary Policy

The monetary policy objective of Hong Kong is currency stability, defined as a stable external exchange value of the currency of Hong Kong, in terms of its exchange rate in the foreign exchange market against the US dollar, at around HK$7.80 to US$1. This clear policy aim is achieved through the linked exchange rate system introduced in 1983.

The linked exchange rate system is characterised by currency board arrangements requiring the Hong Kong dollar monetary base to be at least 100 per cent backed by and changes in it to be 100 per cent matched by corresponding changes in US dollar reserves held in the Exchange Fund at the fixed exchange rate of $7.80 to US$1. In Hong Kong, the monetary base includes the amount of currency notes and coins issued, the Aggregate Balance (the sum of the clearing balances of banks held with the HKMA for the purpose of effecting the clearing and settlement of transactions between banks themselves and also between the HKMA and banks), and the outstanding amount of EFBNs.

Banks have unrestricted access to a Discount Window for day-end liquidity through repurchase agreements using EFBNs as collateral. Under the currency board system, Hong Kong dollar exchange rate stability is maintained through an interest rate adjustment mechanism.

The expansion or contraction in the monetary base leads interest rates for the domestic currency to fall or rise, respectively, creating the monetary conditions that automatically counteract the original capital movements, ensuring stability of the exchange rate.

A Currency Board Sub-Committee under the EFAC was established in August 1998 to oversee the operation of the currency board system in Hong Kong and recommend to the Financial Secretary through EFAC measures to enhance the robustness and effectiveness of Hong Kong's currency board arrangements.