ENG-2012 — Page 98

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Financial and Monetary Affairs

Establishment of the Financial Services Development Council

On 1 July 2012, a preparatory task force came into operation to assist the Government in studying the establishment of a financial services development council to facilitate and enhance the long-term development of Hong Kong's financial services industry. In a report submitted to the Chief Executive in December 2012, the task force recommended that the new council be a high-level and cross-sector advisor to the Government and its main functions. should include giving advice to the Government to facilitate the formulation and implementation of appropriate policies, providing a platform for the financial services industry to express and exchange their views, conducting policy research, promoting Hong Kong's financial services on the Mainland and overseas, and upgrading the skills and expertise of financial industry practitioners.

Alignment with International Agenda, Improving Market Quality and Investor Protection

Basel III Implementation in Hong Kong

As an international financial centre, Hong Kong intends to follow the international timeline of the Basel Committee on Banking Supervision (BCBS) for implementation of Basel III standards in Hong Kong. To this end, the Banking (Amendment) Ordinance 2012 was enacted by the Legislative Council in February 2012 to empower the Monetary Authority to make rules prescribing capital, liquidity and disclosure requirements for Als. The Banking (Capital) (Amendment) Rules 2012, made in October 2012, introduce the first phase of Basel III standards from January 2013 covering principally minimum capital requirements, in accordance with the BCBS' recommendation.

Regulation of Over-the-Counter Derivatives

Working closely with the SFC and the HKMA following two rounds of public consultation in October 2011 and July 2012, the Government expects to introduce legislative proposals into the Legislative Council in mid-2013 to implement the Group of Twenty (G-20) commitments on over-the-counter (OTC) derivative regulatory reform. Under the proposed regulatory regime, certain specified OTC derivative transactions will have to be reported to a local Trade Repository under the HKMA and certain specified standardised OTC derivatives transactions will have to be cleared through a designated central counterparty.

Regulation of Sponsors

After consulting the public between May and July, in December 2012 the SFC announced proposals to improve the overall quality of IPO sponsors and to strengthen market confidence through amendment to the SFC's Corporate Finance Adviser Code of Conduct and Sponsor Guidelines. The Government is also following up with the SFC on proposed legislative amendments in relation to prospectus liability.

Regulation of Electronic Trading

In July 2012, the SFC launched a two-month public consultation on proposals to provide a more coherent and comprehensive regulatory framework for electronic trading (including internet trading, direct market access (DMA) and algorithmic trading) in view of the increased

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