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Highlights of 2013 Economic and Financial Environment Monetary Stability Banking Stability The Hong Kong economy grows faster with the support of stronger domestic demand and improving export performance. The Hang Seng Index records modest gains in a volatile market, while the residential property market is under consolidation. Despite accelerating credit growth, retail banks’ asset quality and liquidity positions remain sound. Profitability of retail banks grows and their net interest margin widens. Locally incorporated authorized institutions continue to be well capitalised. Hong Kong dollar exchange rate against US dollar remains stable within the Convertibility Zone. The Government reiterates its full commitment to the Linked Exchange Rate system with strong public confidence in the Hong Kong dollar. Money market activities are orderly with abundant interbank liquidity, and Hong Kong dollar interest rates edge modestly higher. The HKMA maintains its supervisory focus on banks’ credit and liquidity risk management amid fiscal and economic uncertainties in the US and Europe. The sixth round of macroprudential measures on mortgage loans and a Stable Funding Requirement are introduced to enhance the resilience of the banking sector. Supervision of banks’ Mainland-related business and their compliance with anti-money laundering requirements is also strengthened. The year sees the implementation of the first phase of the Basel III standards, the establishment of the Private Wealth Management Association and the launch of consumer protection initiatives, such as the consumer education programme and the Treat Customers Fairly Charter. Page 4 ANNUAL REPORT 2013 • HONG KONG MONETARY AUTHORITY
International Financial Centre Reserves Management Corporate Functions Hong Kong's position as the premier offshore renminbi business centre gains further momentum with remarkable growth in a full range of renminbi business activities. The first offshore renminbi interbank interest rate fixing has been launched. International co-operation platforms with Australia, London, and Malaysia help promote the breadth and depth of the offshore renminbi market. The HKMA also actively participates in international and regional forums as well as co-operative initiatives to promote financial stability and to enhance Asia's collective voice on global economic and financial affairs. The reporting function of the local trade repository for over-the-counter derivatives is launched and there is further headway in developing Islamic finance in Hong Kong. Despite a volatile global investment environment, the Exchange Fund records an investment income of $81.2 billion, a return of 2.7%. Total assets of the Exchange Fund reach $3,032.8 billion at the end of 2013. The HKMA continues to diversify part of the Fund’s investment into various asset classes. At the end of 2013, the market value of investments under the Long-Term Growth Portfolio (LTGP) totals $88.6 billion, with outstanding investment commitments amounting to $80.2 billion. The HKMA continues to strengthen its connection with the community through timely dissemination of information on its website, effective communication with the media, and other public education activities. Critical internal reviews are carried out and concrete measures are taken to ensure efficient deployment of resources. HKMA staff maintain professionalism in upholding best practices in financial budgeting and disclosure, internal controls, risk management, general support and governance. Staff members also actively participate in green initiatives and charity work. HONG KONG MONETARY AUTHORITY • ANNUAL REPORT 2013 Page 5
Page 1: 2013 Annual Report
Page 5: Contents 4 Highlights of 2013 6 Chi
Page 9 and 10: With this in mind, the HKMA continu
Page 11 and 12: THE HKMA AND THE HONG KONG SPECIAL
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
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REVIEW OF 2013 Overview Amid uncert
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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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ar2013

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