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Optimising the Supervisory Framework
24. We have remained vigilant since the onset of the global financial crisis more than a year ago. We have exercised our best endeavours to ensure financial system stability and strictly performed our supervisory functions. The Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC), and the Office of the Commissioner for Insurance (OCI) have strengthened their regulation of financial institutions to ensure proper protection of the public interest.
25. The HKMA is now looking into the complaints about the Lehman Minibonds. The HKMA and the SFC will examine how to further strengthen the regulatory regime and enhance investor protection and education before making a full report to the Financial Secretary. The Government will then follow up as soon as possible. These measures will help enhance public confidence in our financial system.
Banking Supervision
26. The financial crisis has prompted international organisations and various economies to co-operate and recommend ways to strengthen the future stability of financial markets. To boost the resilience of financial institutions, the HKMA will strengthen the supervisory framework for liquidity risk management for authorised institutions, and revise the methodology for calculating capital adequacy ratios in accordance with the latest guidelines and recommendations of the Basel Committee on Banking Supervision.
27. As precautionary measures to safeguard banking stability in Hong Kong and boost public confidence, the Financial Secretary announced yesterday the use of the Foreign Exchange Fund, on a special and time-limited basis, to establish a Contingent Bank Capital Facility to make available additional capital to locally incorporated licensed banks when necessary. Besides, the Fund will be used to guarantee, with immediate effect, the repayment of all customer deposits. These two measures will remain in force until the end of 2010. Meanwhile, the Hong Kong Deposit Protection Board will continue to review the coverage and compensation limit of the Deposit Protection Scheme, and provide feasible long-term proposals to better protect depositors in the long run.
Regulation of the Securities Industry
28. The SFC has stepped up its efforts, including intensified stress tests, to assess the financial exposure that brokers can withstand in adverse market conditions. The SFC will tighten regulation of fund managers by reviewing the Code on Unit Trusts and Mutual Funds to better protect investors. In addition, the International Organisation of Securities Commissions is reviewing the disclosure of information by distributors of funds at points of sale. The SFC will enhance the disclosure of information to investors, taking into account best international practices and Hong Kong's situation.
Insurance Supervision
29. The OCI is a government department. To further improve the insurance supervisory framework, we see the need to establish an independent Insurance Authority. This will give the regulatory body more flexibility in operations and staff recruitment, and prepare Hong Kong for the "risk-based capital regulatory regime" to be adopted by the international community. We believe the establishment of an independent Insurance Authority will promote the long-term, stable development of our insurance industry. A Government-commissioned consultancy is expected to be completed this year. We will assess the consultant's recommendations and prepare proposals for consultation.
30. To protect policyholders in the event of insurer insolvency, the OCI is exploring with the Hong Kong Federation of Insurers feasible options for establishing Policyholders' Protection Funds.
Control of the Mandatory Provident Fund (MPF)
31. Protecting investors aside, our priority task in enhancing Hong Kong's status as a global financial centre is to increase the competitiveness of our financial sector. To promote market competition and encourage employees to take a more active interest in their MPF investments, the Government will propose changes to the operational arrangements of the MPF system. These changes will allow employees to transfer their contributions from an MPF scheme selected by their employers to a scheme of their own choice. The Government is drafting legislation which we will introduce into this council as early as possible.
Combating Money Laundering and Terrorist Financing
32. To maintain a business and investment-friendly environment, Hong Kong must combat money laundering and terrorist financing effectively. To better co-ordinate our strategies and policies, the Government set up the high-level Central Co-ordinating Committee on Anti-Money Laundering and Counter Financing of Terrorism. The initial stage of work is to scrutinise the supervisory regimes adopted by individual financial sectors to combat money laundering and terrorist financing, with a view to drawing up legislative proposals. Departments and organisations concerned will consult the industry on their recommendations.
Development of the Securities Market
33. In the face of competition from other cities in the region, we need to be forward looking in planning the development of our securities market. We have to deepen and broaden the scope of the market, expand its service network and improve its reliability; develop the commodity futures market; enhance the efficiency of listings; attract more new enterprises from the emerging markets to list in Hong Kong, including large corporations from Eastern Europe and Russia; and, push ahead with the development of an Islamic bond market.
Stability of Real Estate Market
34. The real estate market is an important contributor to Hong Kong's economy and is closely related to people's livelihoods. To most people, their flats are their most important assets. In the years following reunification, the negative equity faced by many home owners during the Asian financial turmoil has left a mark on the community. Through a re-positioned housing policy and market-driven land supply over the past six years, we have rebuilt people's confidence in the property market, solved the over-supply problem and allowed the property market to resume development and vitality. We cherish these hard-earned results and will continue to implement the Application List system to allow the market to decide the new land supply. Despite the financial crisis we now face, the Government and government-owned statutory bodies will not indiscriminately supply residential or commercial land. Neither will we sell land way below market prices.
(To be continued)
Ends/Wednesday, October 15, 2008
Issued at HKT 11:32
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