ENG-2018 — Page 95

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Financial and Monetary Affairs

compliance with MPF legislative requirements, thus protecting the interests of scheme members. It monitors MPF trustees, investigates cases of non-compliance, conducts inspections and takes enforcement action. It arranges programmes to strengthen the public's understanding of new developments in the MPF System and to educate scheme members on MPF investments. The MPFA is also the Registrar of Occupational Retirement Schemes.

Financial Reporting Council

The Financial Reporting Council (FRC), a statutory body established under the Financial Reporting Council Ordinance, conducts independent investigations and enquiries into Hong Kong-listed entities' possible non-compliance with accounting standards as well as their auditors' possible auditing and reporting irregularities. The council also reviews the financial statements of listed entities regularly. It completed 16 investigations and one enquiry in 2018.

A Process Review Panel reviews the council's handling of cases to ensure its actions and decisions comply consistently with its internal guidelines and procedures.

Auditor Regulatory Reform

The international trend is for oversight of the regulation of auditors of public interest entities to be independent of the profession itself. To implement auditor regulatory reform, an amendment bill was under scrutiny in the Legislative Council in 2018 that would allow the FRC to become a full-fledged independent oversight body regulating auditors of listed entities.

The following sections set out the development of various sectors of financial services in 2018.

Banking and Payment System

Banking System

Hong Kong has a resilient banking sector, with healthy asset quality and strong liquidity and capital positions. The city was the world's sixth and Asia's second largest banking centre in terms of external positions, according to the Bank for International Settlements Quarterly Review for December 2018.

International financial institutions maintain a strong presence in Hong Kong. Of the world's top 100 banks, 77 operate in the city. At the year end, 145 of the 152 licensed banks in Hong Kong were beneficially owned by parties outside Hong Kong.

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.

Sum of liabilities to banks and non-bank customers outside Hong Kong and claims on banks and non-bank customers outside Hong Kong, such as equities, securities and capital instruments.

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.

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