Supervisory Co-operation

The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) work very closely to ensure that there is an open market with a level playing field for all intermediaries in the securities industry of Hong Kong. To strengthen supervisory co-operation and reflect changes in the respective functions of the two regulators introduced by the Securities and Futures Ordinance, the HKMA has entered into a revised Memorandum of Understanding (MOU) (PDF file, 307KB) with the SFC. The revised MOU elaborates on the legal framework and sets out the operational details relating to the respective roles and responsibilities of the two regulators regarding the securities related activities of authorized institutions. The HKMA and the SFC hold regular meetings under the MOU to discuss matters of mutual interest. The training programmes of either regulator are also made available to the staff of the other where relevant.

The HKMA and the Insurance Authority (IA) have signed a Memorandum of Understanding (MoU) (PDF file, 1.1MB) which aims to enhance the co-operation, exchange of information and mutual assistance between the two authorities.

Under this MoU, the HKMA and the IA agree to work together:

1. to co-ordinate the supervision of the insurance-related activities of authorized institutions (AIs) (such as when they act as insurance intermediaries) and authorized insurers that are connected to AIs; and
   
   

2. to promote information exchange and sharing, as permitted under the Banking Ordinance and the Insurance Companies Ordinance, between the HKMA and the IA in order to assist each other to exercise their respective statutory functions.

While the Mandatory Provident Fund Schemes Authority is the lead regulator in respect of mandatory provident fund (MPF) business, the HKMA, the IA and the SFC are responsible for supervising the conduct of MPF intermediary activities by persons under their respective regime. A Memorandum of Understanding Concerning the Regulation of MPF Intermediaries (PDF file, 1.9MB) has been signed by the four regulators. This Memorandum aims to ensure conformity in regulatory approach, minimize duplication of regulatory efforts, close gaps in regulatory boundaries, minimize mis-selling by MPF intermediaries and maximize protection of MPF scheme participants.

The Hong Kong Deposit Protection Board (HKDPB) is a statutory body established by the Deposit Protection Scheme Ordinance to administer the deposit protection scheme (DPS) in Hong Kong. The Scheme provides a safety net for deposits of up to HK$100,000 per depositor per bank. The HKMA and the HKDPB share the objective of promoting the stability of the banking system. To accomplish this important objective, the HKMA and the HKDPB have agreed on how the two organisations should co-operate in performing their respective functions. Since the DPS Ordinance requires the HKDPB to perform functions through the HKMA, detailed arrangements for co-operation have been set out in a Memorandum of Understanding between them.

The Financial Reporting Council (FRC) is a statutory body established by the Financial Reporting Council Ordinance (FRCO), and has commenced operation since July 2007. Its main functions are to investigate into auditing and reporting irregularities in relation to listed entities, and to enquire into non-compliances with relevant accounting requirements in listed entities' financial reports. The FRCO provides that the FRC shall notify the HKMA where the listed entity that is the subject of investigation or enquiry is an AI or its related company (i.e. controller, subsidiary or fellow subsidiary), and that the investigator or enquirer has to consult the HKMA prior to exercising the relevant powers under the FRCO for the purpose of such investigation or enquiry. Given these statutory requirements, the HKMA and the FRC have entered into a Memorandum of Understanding (MoU) (PDF file, 274KB), which aims to elaborate on the mechanisms for communication and information exchange between the two entities, as well as to enhance the ongoing cooperation and mutual assistance.

The exposure of banks to new types of risk around the world has increased the need for supervisors to co-operate with one another, both geographically and functionally. To enhance the exchange of supervisory information and co-operation, the HKMA has entered into MOUs or other formal arrangements with a number of banking supervisory authorities outside Hong Kong. Further details of the arrangements are summarised below.

In general, the co-operative arrangements provide the formal framework under which the HKMA and its counterparts agree to :

1. share and exchange, to the extent permitted by law, supervisory information so as to assist in the supervision of banks that operate in both signatories’ jurisdictions;
   
   

2. hold regular meetings and have informal contacts to discuss matters of common interest;
   
   

3. consult each other regarding any cross-border establishment or investment by the banks; and
   
   

4. keep the supervisory information shared confidential and to restrict the sharing, use and onward disclosure of such information in accordance with the provisions of the arrangements.

The HKMA continues to participate in this process by extending its bilateral co-operation with banking supervisors in other countries. In case of need, the HKMA also contacts or holds regular meetings with other supervisory authorities to discuss matters of common interest.

The HKMA plays an increasingly active role in international and regional forums of banking supervision. It currently chairs the Executives' Meeting of East Asian-Pacific Central Banks' (EMEAP) Study Group on Banking Supervision and was one of the participants in a working group formed by the Basle Committee to draft the Core Principles for Effective Banking Supervision.

Updated on 6 October 2008