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One of the main policy objectives of the Hong Kong Monetary Authority (HKMA) is to promote the safety and stability of the banking system through the regulation of banking business and the business of taking deposits, and the supervision of authorized institutions. In the supervision of authorized institutions, the HKMA follows international practices as recommended by the Basel Committee on Banking Supervision, for example, the capital adequacy framework, and Core Principles for Effective Banking Supervision. The supervisory approach of the HKMA is based on a policy of "continuous supervision", through on-site examinations, off-site reviews, prudential meetings, co-operation with external auditors and sharing information with other supervisors. This aims at detecting any problems at an early stage. The "CAMEL" rating system is adopted to help identify those institutions whose weaknesses in financial condition, compliance with laws and regulations, and overall operating soundness require special supervisory attention. |
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The HKMA periodically conducts on-site examinations of individual institutions. The coverage of an examination may range from an investigation of specific areas to a comprehensive review of an institution's operations. Thematic examinations of selected institutions allow the HKMA to benchmark the institutions’ risk management practices on important business lines and major risk areas (e.g. renminbi business, retail wealth management, and anti-money-laundering and counter-terrorist-financing controls over certain high risk banking activities). On-site examinations provide a valuable opportunity to assess at first hand how an institution is managed and controlled. |
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Off-site Review and Prudential Meeting As on-site examinations are periodic in nature, in order to achieve "continuous supervision," they are supplemented by on-going off-site analyses of the financial condition of individual institutions and the assessment of the quality of their management, including the policies and systems in managing risks. The scope of off-site reviews ranges from regular analysis of statistical returns, covering various aspects of the operations of authorized institutions, to an extensive annual review of the performance and financial position of individual institutions. Annual Off-site reviews are usually followed by a prudential meeting with senior management. Frequent contacts are also made with individual institutions at various levels of management as specific issues arise. |
