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About the HKMA The Hong Kong Monetary Authority is Hong Kong’s central banking institution. The HKMA has four main functions: maintaining currency stability within the framework of the Linked Exchange Rate system; promoting the stability and integrity of the financial system, including the banking system; helping to maintain Hong Kong’s status as an international financial centre, including the maintenance and development of Hong Kong’s financial infrastructure; and managing the Exchange Fund. THE HKMA’S LEGAL MANDATE the HKMA was established on 1 April 1993 after the legislative Council passed amendments to the exchange Fund ordinance in 1992 empowering the Financial Secretary to appoint a Monetary Authority. the powers, functions and responsibilities of the Monetary Authority are set out in the exchange Fund ordinance, the Banking ordinance, the Deposit protection Scheme ordinance, the Clearing and Settlement Systems ordinance and other relevant ordinances. the division of functions and responsibilities in monetary and financial affairs between the Financial Secretary and the Monetary Authority is set out in an exchange of letters between them dated 25 June 2003. this exchange of letters also discloses the delegations made by the Financial Secretary to the Monetary Authority under these ordinances. the letters are public documents and may be found on the HKMA website. the exchange Fund ordinance establishes the exchange Fund under the control of the Financial Secretary. According to the ordinance, the Fund shall be used primarily for affecting the exchange value of the Hong Kong dollar. it may also be used for maintaining the stability and integrity of the monetary and financial systems of Hong Kong, with a view to maintaining Hong Kong as an international financial centre. the Monetary Authority is appointed under the exchange Fund ordinance to assist the Financial Secretary in performing his functions under the exchange Fund ordinance and to perform such other functions as are assigned by other ordinances or by the Financial Secretary. the office of the Monetary Authority is known as the HKMA, and the Monetary Authority is the Chief executive of the HKMA. the Banking ordinance provides the Monetary Authority with the responsibility and powers for regulating and supervising banking business and the business of taking deposits. under the ordinance, the Monetary Authority is responsible for the authorization of licensed banks, restricted licence banks and deposit-taking companies in Hong Kong. the Clearing and Settlement Systems ordinance provides a statutory regime for the Monetary Authority to designate and oversee clearing and settlement systems that are material to the monetary or financial stability of Hong Kong or to the functioning of Hong Kong as an international financial centre. under the Deposit protection Scheme ordinance, the Monetary Authority is charged with implementing the decisions of the Hong Kong Deposit protection Board, such as deciding whether compensation should be paid to the depositors of a failed scheme bank pursuant to the ordinance. Page 8 Annual Report 2013 • Hong Kong Monetary Authority
THE HKMA AND THE HONG KONG SPECIAL ADMINISTRATIVE REGION GOVERNMENT The HKMA is an integral part of the Hong Kong Government, but is able to employ staff on terms different from those of the civil service in order to attract personnel of the right experience and expertise. The Chief Executive of the HKMA and his staff are public officers. In its day-to-day work the HKMA operates with a high degree of autonomy within the relevant statutory powers conferred upon, or delegated to, the Monetary Authority. The Financial Secretary is responsible for determining the monetary policy objective and the structure of the monetary system of Hong Kong: a letter from the Financial Secretary to the Monetary Authority dated 25 June 2003 specifies that these should be currency stability defined as a stable exchange value at around HK$7.80 to one US dollar maintained by Currency Board arrangements. The Monetary Authority is on his own responsible for achieving the monetary policy objective, including determining the strategy, instruments and operational means for doing so. He is also responsible for maintaining the stability and integrity of the monetary system of Hong Kong. The Financial Secretary, assisted by the Secretary for Financial Services and the Treasury, has responsibility for policies for maintaining the stability and integrity of Hong Kong’s financial system and the status of Hong Kong as an international financial centre. In support of these policies, the Monetary Authority’s responsibilities include: • promoting the general stability and effective working of the banking system • promoting the development of the debt market, in co-operation with other relevant bodies • matters relating to the issuance and circulation of legal tender notes and coins • promoting the safety and efficiency of the financial infrastructure through the development of payment, clearing and settlement systems and, where appropriate, the operation of these systems • seeking to promote, in co-operation with other relevant bodies, confidence in Hong Kong’s monetary and financial systems, and market development initiatives to help strengthen the international competitiveness of Hong Kong’s financial services. The Exchange Fund is under the control of the Financial Secretary. The Monetary Authority, under delegation from the Financial Secretary, is responsible to the Financial Secretary for the use of the Exchange Fund, and for the investment management of the Fund. HONG KONG MONETARY AUTHORITY • ANNUAL REPORT 2013 Page 9
Page 1: 2013 Annual Report
Page 5 and 6: Contents 4 Highlights of 2013 6 Chi
Page 7 and 8: International Financial Centre Rese
Page 9: With this in mind, the HKMA continu
Page 13 and 14: Over the years the HKMA has progres
Page 15 and 16: Banking Advisory Committee The Bank
Page 17 and 18: Mr Lester HUANG, JP Managing Partne
Page 19 and 20: THE EXCHANGE FUND ADVISORY COMMITTE
Page 21 and 22: Terms of reference (1) To monitor t
Page 23 and 24: Terms of reference (1) The objectiv
Page 25 and 26: THE EXCHANGE FUND ADVISORY COMMITTE
Page 27 and 28: Terms of reference (1) To recommend
Page 29 and 30: THE DEPOSIT-TAKING COMPANIES ADVISO
Page 31 and 32: Stefan GANNON, JP General Counsel F
Page 33 and 34: HKMA Organisation Chart 1 January 2
Page 35 and 36: THE ECONOMY IN REVIEW Overview The
Page 37 and 38: Inflation Inflationary pressures, w
Page 39 and 40: trended downwards, while the value
Page 41 and 42: PERFORMANCE OF THE BANKING SECTOR T
Page 43 and 44: Asset quality The asset quality of
Page 45 and 46: As a result of the average qualifyi
Page 47 and 48: OBJECTIVES The overriding objective
Page 49 and 50: Money market Interbank liquidity re
Page 51 and 52: Other activities The EFAC Currency
Page 53 and 54: Chart 7 Banknotes in circulation at
Page 55 and 56: PLANS FOR 2014 AND BEYOND While the
Page 57 and 58: REVIEW OF 2013 Overview Amid uncert
Page 59 and 60: The HKMA continued to monitor the i
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Supervisor-driven stress testing pr
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Following a noticeable increase in
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Basel III (continued) Pillar 3 The
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Basel III (continued) and haircuts
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Basel III (continued) Participation
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Accounting standards The Internatio
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Treat Customers Fairly Charter The
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Table 3 Banking complaints received
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The HKMA is a member of the SWIFT O
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PLANS FOR 2014 AND BEYOND Superviso
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Basel III Capital standards Under t
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Recovery and resolution During 2014
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Development of Supervisory Policies
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In accordance with the payout refor
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OVERVIEW A divergent trend in growt
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developments in domestic and cross-
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Development of Islamic finance The
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Hong Kong’s financial infrastruct
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Chart 4 Euro RTGS system Chart 5 Re
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The RTGS system links with Shenzhen
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Money settlement service for invest
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PLANS FOR 2014 AND BEYOND The HKMA
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Pan-Asian CSD Alliance project The
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THE EXCHANGE FUND The Exchange Fund
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PERFORMANCE OF THE EXCHANGE FUND Th
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Chart 1 Investment return of the Ex
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CORPORATE DEVELOPMENT Media relatio
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Staffing The establishment of the H
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Temporary resources will continue t
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on the budget and recommends any ch
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OFFICE OF THE GENERAL COUNSEL The O
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The Exchange Fund Report of the Dir
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Report of the Director of Audit (co
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Exchange Fund - Statement of Compre
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Exchange Fund - Statement of Change
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Exchange Fund - Statement of Cash F
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Exchange Fund - Notes to the Financ
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28 June The HKMA issues a circular
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Annex Authorized Institutions and L
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Table A Major Economic Indicators (
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Table C Authorized Institutions: Do
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Table E Presence of World’s Large
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Table G Major Balance Sheet Items b
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Table I Loans to and Deposits from
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Table K Deposits from Customers All
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Table L Geographical Breakdown of N
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Reference Resources The HKMA Annual
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HONG KONG MONETARY AUTHORITY 55 / F
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