ENG-2017 — Page 112

4

Financial and Monetary Affairs

Banking

Hong Kong maintains three tiers of deposit-taking institutions: licensed banks (LBs), restricted licence banks (RLBs) and deposit-taking companies (DTCs)'. They are known collectively as authorised institutions (Als) under the Banking Ordinance and are licensed by the HKMA.

The city has one of the world's highest concentrations of banking institutions. At the end of 2017, there were 155 LBs, 19 RLBS and 17 DTCs. These 191 Als maintained a network of 1,261 local branches. There were also 49 representative offices of banks incorporated outside Hong Kong.

Hong Kong Monetary Authority

The HKMA maintains 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; promotes stability and integrity of the financial system, including the banking system; helps maintain Hong Kong's status as an international financial centre, including the maintenance and development of Hong Kong's financial infrastructure, and manages the Exchange Fund.

The HKMA is an integral part of the government, but operates with a high degree of autonomy complemented by a high degree of accountability and transparency, and can employ people on terms different from those of the civil service to attract personnel of suitable experience and expertise. It is accountable to the Financial Secretary, who is advised by the Exchange Fund Advisory Committee (EFAC) in the control of the Exchange Fund.

The Banking Advisory Committee and Deposit-taking Companies Advisory Committee are established under the Banking Ordinance to advise on policy matters. They are chaired by the Financial Secretary and comprise members from banking and other professions.

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 preserve the stability and effective working of the banking system, while at the same time providing flexibility for Als to make commercial decisions.

Recent Developments

The Hong Kong banking sector remained sound in 2017. As part of efforts to strengthen the resilience of the banking system, the Banking (Amendment) Bill 2017 was introduced into LegCo in October. It aims to implement the latest Basel standards on the financial exposure limits of Als, as well as the recovery planning requirements promulgated by the Financial Stability Board. The Banking (Capital) (Amendment) Rules 2017 and the Banking (Liquidity) (Amendment) Rules 2017 were also passed by LegCo in November to implement the latest Basel III requirements from 1 January 2018.

7

Only LBS may conduct full banking services, including the provision of current and savings accounts and acceptance of deposits of any size and maturity. RLBS may take deposits of any maturity of $500,000 or above. DTCs may take deposits of $100,000 or above with an original maturity of at least three months.

68