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Following is the speech delivered by the Financial Secretary, John C Tsang, at the First Pan-Asian Regulatory Summit at the Harbour Grand Hong Kong today (November 29):
Distinguished Guests, Ladies and Gentlemen,
Good afternoon.
It is a great pleasure for me to join you today.
First of all, congratulations to COMPLINET on organising the First Pan-Asian Regulatory Summit.
A very warm welcome to all the distinguished speakers and guests from around the world.
It is very encouraging to see such an exceptional line-up of experts here for this Summit.
Hong Kong is the ideal place for this sort of elite gathering. We are an international financial centre in the Asian time zone. Our city is a welcoming and convenient meeting place for people from around the world. And, with just 26 days to go to Christmas, Hong Kong is a great place to do some heavy shopping!
Joking aside, the financial crisis has highlighted a number of crucial issues.
Among them is the close inter-connectivity of our financial systems in a globalised world.
It has also highlighted Asia's expanding role in the world economy.
And it has underscored the need for the right regulatory environment tailored to the new post-crisis financial landscape.
Although we were hit rather hard by the financial tsunami, Hong Kong's economy has been on the mend for some time. We are forecasting 6.5 per cent GDP growth this year. Our recovery is due in no small part, dare I say, to our regulators who have met the challenges of the past two years head-on.
But let us not lose sight of the hurdles that still lie ahead. These include the knock-on effects of quantitative easing policies as well as concerns about asset price bubbles, inflation and increased protectionism.
Perhaps, our most important collective challenge is to avoid a repeat of the global financial crisis.
The events of the past few years have focused the attention of governments and regulators around the world on refining and strengthening their regulatory regimes. Hong Kong is no exception.
From the onset of the financial crisis, our strategy has been three-fold: to stabilise our financial system; to support enterprises; and to preserve jobs.
Our counter-measures included providing additional liquidity to banks; implementing a full deposit guarantee; and introducing loan guarantee schemes for small and medium size enterprises.
We also deployed a range of fiscal stimulus, job creation and relief measures. These have helped to restore confidence and kick-start our recovery.
We were able to draw on our experiences from the Asian financial crisis a decade earlier. We also had a little more time than economies in the US and Europe to prepare for the full force of the financial tsunami.
This gave us some breathing space to bolster our financial system as the economic storm drew nearer.
We may not have the same luxury in the future.
Allow me to share with you some of Hong Kong's experiences during the global financial crisis.
Hong Kong's banking system has remained sound and liquid throughout the crisis. We can put this down ˇV at least in part ˇV to conservative supervision and the prudent lending culture of institutions in Hong Kong and Asia.
Hong Kong was among the first jurisdictions in the world to adopt Basel II standards in 2007. This helped to shore up the capital adequacy of banks at a critical time. It also tightened the risk management of lending institutions.
We welcome the Basel III accord unveiled in September this year. On the whole, our banks already meet these new standards. The capital adequacy ratios of locally incorporated banks remain strong at around 15 per cent. This is well above the local statutory requirement and international standard of 8 per cent.
During the financial crisis, we have been able to cultivate our advantage as a city in China, but at the same time outside the Mainland. This, importantly, at a time of significant development for our nation's financial sector.
Our strategic positioning as China's global financial centre under the principle of "One Country, Two Systems" gives our financial market a distinct edge. We have been able to benefit from, and contribute to, Mainland Chinaˇ¦s economic and financial resilience and growth.
With a free flow of capital, international connections and transparent regulation, we have been able to serve our nation's financial development. Recent initiatives to internationalise the Renminbi are a case in point.
At the same time, as an international financial centre providing a full range of world-class services, Hong Kong has a role to play in safeguarding our nation's financial security.
In effect, it is "one country, two financial systems". Hong Kong maintains its own legal, taxation and regulatory systems, while also enjoying unrivalled access to the Mainland market.
We will continue to develop the "China factor" as our unique advantage.
Equally important to Hong Kong is our "global factor".
Our city has built its reputation on providing a business-friendly environment that is fully integrated with the rest of the world.
This includes a highly open and internationalised market and a transparent regulatory regime.
We also have the rule of law, a rich pool of professional talent and the free flow of information. All these allow Hong Kong to be not just a place for China-related activity, but also a prime location for global operations.
A great strength of our regulatory regime is its international alignment.
Hong Kong was one of the few developed markets that did not have to impose new, emergency short selling regulations during the financial crisis because our rules, which were introduced back in 1998, subsequent to the Asian financial crisis, remain applicable under the current situation.
Despite the speculative activities and abusive short selling of Hong Kong stocks during the Asian financial crisis, these rules still proved to be controversial when they were first introduced. Nevertheless, they have since played a crucial role in maintaining market stability. This also underlines our effort to strike a balance between market facilitation and regulation.
So where do we go from here?
We have mapped out a multi-pronged strategy to improve our market quality, promote investor protection, facilitate market development, and enhance our regulatory system.
First, enhancing disclosure and transparency.
To improve market transparency and quality, our aim is to require listed corporations to disclose price sensitive information in a timely manner. This will bring our regulatory regime for listed corporations more in line with overseas jurisdictions.
It will also sustain Hong Kongˇ¦s position as a leading international financial centre and premier capital formation centre in the Region.
We have already consulted the public on this topic.
We plan to introduce a bill into our Legislative Council to codify the disclosure requirements in the Securities and Futures Ordinance ("SFO") in this legislative session.
Another goal is to introduce a scripless securities market in 2013.
Our regulators, led by the Securities and Futures Commission (SFC), have outlined details of this proposal. The Government will lend support to the initiative by introducing the necessary legislative amendments.
Paperless trading will improve the efficiency and competitiveness of our securities market.
It will also help to enhance shareholder transparency and promote corporate governance.
Turning now to the insurance industry.
We have proposed establishing an independent Insurance Authority. Our aim here is to better protect policyholders and provide effective regulation on a par with international standards.
A public consultation exercise ended last month. We are now preparing detailed proposals taking into account the views received.
Preventive measures are as important as remedial measures in protecting investors.
Our regulators, together with the Consumer Council, have already stepped up efforts in educating investors on the risks and strategies involved.
We have proposed setting up a cross-sectoral investor education council to enhance the financial literacy of our investing public.
We also plan to introduce a financial dispute resolution scheme. This would provide an impartial, speedy and affordable way to resolve monetary disputes between investors and financial institutions.
The financial tsunami has also highlighted the benefit of financial safety nets to enhance investor confidence.
In January next year, we will raise the protection limit under our Deposit Protection Scheme five-fold to HK$500,000.
This will facilitate a smooth exit at the end of this year from the 100 per cent deposit guarantee, which we introduced as an emergency measure in late 2008.
We also plan to establish a Policyholders' Protection Fund. This will help improve insurance market stability and safeguard the interest of policyholders in the event of insolvency of an insurer.
We aim to consult the public on the establishment of the Fund soon.
Last but by no means least, we are refining our legislative framework.
Actions are in hand to update our company and trust laws.
We have completed two phases of public consultations on the draft Companies Bill. This is a monumental and highly complex exercise, but the Bill is taking shape, with provisions affecting the operation of more than 840,000 companies in Hong Kong.
We aim to introduce the Companies Bill into our Legislative Council early next year.
We are also modernising the Trustee Ordinance. This will strengthen the competitiveness of our trust services industry and facilitate financial market development in Hong Kong.
We are preparing relevant amendments to the Trustee Ordinance and aim to introduce an amendment bill into the Legislative Council next year.
Ladies and Gentlemen, our key policy initiatives are focused on improving the regulatory framework, enhancing investor protection, and facilitating market development.
The key, as always, is to strike a proper balance between investor confidence and the burden of compliance without stifling innovation.
I have covered some of the things we are doing to maintain Hong Kong's financial competitiveness and transparency.
This is crucial to our city's long-term prosperity and to our role as China's global financial centre.
I look forward to learning more about the views of speakers, experts and delegates during this event.
Once again, congratulations to COMPLINET on organising this 1st Pan-Asian Regulatory Summit.
This is a great platform to share ideas and experiences that will ultimately help establish the right regulatory environment for the post-tsunami financial landscape.
I hope that you all have a successful Summit, that our visitors enjoy their stay in Hong Kong and that you are all able to find some time to explore our city, and of course, shop a lot!
Thank you.
Ends/Monday, November 29, 2010
Issued at HKT 15:17
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