Financial Services Bureau

In the past year, we have been working on 51 pledges, of which:

The following sets out the detailed report for each main programme area.

The Banking Sector

Year Pledge Present Position
Action Completed
1996 1. To protect holders of "smart cards" and safeguard the integrity of the retail payment system by introducing a legislative framework for such cards in 1996-97. We established the legislative framework for "smart cards" in瓱ay 1997. Guidelines on authorisation of multi-purpose stored value cards were also issued.
1996 2. To improve the standard and transparency of banking services by implementing a Code of Banking Practice in early 1997. We introduced the Code of Banking Practice in July 1997.
1996 3. To strengthen our banking supervisory framework in 1997 by the introduction of a reporting system by authorised institutions for market risks. We implemented the reporting framework in December 1996.
1996 4. To ensure an orderly and efficient inter-bank foreign exchange and deposit market by introducing a regulatory framework for money brokers in 1996. We introduced the regulatory framework for money brokers in May 1997.
1996 5. To streamline and consolidate the provisions of the Banking Ordinance in 1995-96. We have consolidated the penalty and appeal provisions of the Banking Ordinance with the enactment of the Banking (Amendment) Ordinance 1997 which commenced operation in May 1997.
1995 6. To introduce by the end of 1996 a new inter-bank payment system based on Real Time Gross Settlement (RTGS) principles. We introduced a new inter-bank payment system based on RTGS principles in full compliance with international standards in December 1996.
1995 7. To review the three-tier structure of authorised institutions in 1996. We have completed the review of the three-tier structure of authorised institutions.
Action in Progress: On Schedule
1996 8. To promote banking and monetary stability and facilitate the development of a secondary mortgage market by establishing a Mortgage Corporation in 1997, initially owned by the Government through the Exchange Fund. We established the Hong Kong Mortgage Corporation Limited in March 1997. We are setting up various operational systems for the Corporation to commence operation in the fourth quarter of 1997.
1996 9. To improve communication between the Hong Kong Monetary Authority and authorised institutions, including the electronic submission of prudential returns, by introducing an electronic network in 1997. We have completed the feasibility study of the electronic submission system and the related system design with a view to implementing the system by end 1997.
1995 10. To review the capital adequacy framework to cover authorised institutions' exposure to volatility in the financial markets. We have amended the Seventh Schedule to the Banking Ordinance for covering authorised institutions' exposure to volatility in the financial markets in the capital adequacy framework. The new capital adequacy framework will be implemented by end 1997 in accordance with the Basle Committee's recommendation. Policy guideline on the calculation of market risk capital charge will also be issued to authorised institutions by end 1997.
On-going Commitment
1996 11. To strengthen our banking supervisory framework in 1997 by the use of external auditors on a more regular basis to examine the internal control systems of authorised institutions. We have commissioned 18 auditors' reports on internal controls.


Securities, Futures and Debt Markets

Year Pledge Present Position
Action Completed
1996 1. To continue to encourage the development of the debt market, in 1997, by extending further the benchmark yield curve for Hong Kong dollar debt by introducing ten-year Exchange Fund Notes when market conditions are favourable. We launched the first issue of ten-year Exchange Fund Notes in October 1996.
1996 2. To continue to encourage the development of the debt market, in 1997, by enabling payment for debt securities to be made against delivery on a real-time basis when the new inter-bank payment system based on RTGS principles is implemented. We launched the delivery versus payment on a real-time basis for debt securities in December 1996.
1996 3. To encourage, in 1997, the Hong Kong Futures Exchange (HKFE) to link up with reputable international exchanges to facilitate the introduction of new financial products in Hong Kong. HKFE has linked up with the Philadelphia Stock Exchange in April 1997 to allow the latter's currency options contracts to be traded in Hong Kong during Asian business hours and with the New York Mercantile Exchange in June 1997 on the trading of futures contracts of petroleum and other commodities locally.
1995 4. To continue to encourage the development of the debt market by:
       
  • promoting an understanding of Hong Kong's financial system among investors, issuers of debt instruments and other interested parties, such as credit rating agencies; and
We are regularly compiling and releasing statistics on debt market activities in Hong Kong.
  • discussing with the Airport Authority issuance of its fixed rate Hong Kong dollar debt paper.
We have finalised the legal documentation on the note issuance programme.
Action in Progress: On Schedule
1996 5. To encourage, in 1997, the Hong Kong Securities Clearing Company (HKSCC) to improve its services under the central clearing and settlement system (CCASS) with a view to enhancing investor protection. The HKSCC has issued a consultation paper in January 1997 to seek public views on investor participation in the CCASS. Based on the public comments received, HKSCC is now working out the implementation plan and is scheduled to introduce the first batch of investor participation accounts in the second quarter of 1998.
1996 6. To further upgrade the Central Moneymarkets Unit service operated by the Hong Kong Monetary Authority by introducing the securities lending programme in 1997 to improve the efficiency of the clearing services for debt instruments and enhance liquidity in the debt market. We have consulted market participants on the framework for securities lending programme. Both the Hong Kong Capital Markets Association and institutional investors supported the framework. We are preparing the legal documents and developing the software.
Action in Progress: Under Review
1995 7. To consolidate all securities and futures-related ordinances to remove inconsistencies and improve the regulatory framework. To this end, to issue a White Bill for public consultation in 1996. Securities and Futures Commission (SFC) has issued the draft Bill with two consultation papers in April and December 1996. In view of the fact that a number of fundamental policy issues and different public opinion are raised, the Administration and the SFC are examining the new features, in particular, the controversial elements in the draft Bill.
On-going Commitment
1996 8. To encourage the Stock Exchange of Hong Kong (SEHK) to develop new products and facilities in 1997. Two new products, namely regional derivative warrants and regional convertible bonds, were launched for trading on the SEHK in April 1997.


Insurance Companies, Occupational Retirement Schemes and Mandatory Retirement Fund Schemes

Year Pledge Present Position
Action Completed
1996 1. To identify measures in 1997 to promote the development of captive insurance business (i.e. self-insurance by very large companies) in Hong Kong, which will provide multinational conglomerates with a wider range of insurance options and better risk-management instruments. For example, we will consider relaxing the regulatory regime to encourage captive insurance while ensuring prudential regulation. Measures to promote the development of captive insurance business, including regulatory concessions, have been identified. A Bill providing regulatory concessions for captive insurance companies was enacted in May 1997.
1996 2. To introduce legislation in 1997 to recognise parents' insurable interest in the lives of their children. A Bill providing for recognition of parents' insurable interest in the lives of their children was enacted in May 1997.
1996 3. To provide legal backing in 1997 for professional assessment of the financial soundness of life insurance business. A Bill seeking to empower the Insurance Authority to prescribe, by regulation, the professional standards to be complied with by appointed actuaries in assessing the financial soundness of life insurance business was enacted in May 1997. The relevant Regulation will be made shortly.
1996 4. To review in 1997 the criteria for authorising insurance business in Hong Kong. The review was completed and the revised authorisation criteria were issued in October 1996.
1995 5. To review our monitoring of registered occupational retirement schemes in liaison with the retirement scheme management industry. The rules relating to the preparation of actuarial certificates for the monitoring of registered defined benefit schemes were gazetted in January 1997. These rules were brought into operation in April 1997.
Action in Progress: On Schedule
1996 6. To promote the development of the reinsurance market. We will consult representatives of the industry on possible promotional measures in 1997. A Working Group comprising prominent representatives of the insurance industry has been formed. It has identified that taxation, education and training, and overseas promotion are essential for promotion of the reinsurance market. We are working closely with relevant departments, industry bodies and tertiary educational institutions and enlisting their support for implementation of the promotional measures identified.
1996 7. To consider in 1997 the establishment of the Insurance Authority as an independent regulatory body. A report examining the costs and benefits of an independent Insurance Authority and the possible mode of operation has been completed and is under consideration. A decision will be taken in 1998.
Action in Progress: Behind Schedule
1996 8. To conduct a public education and publicity campaign on the Mandatory Provident Fund (MPF) Scheme in 1997. As the MPF legislative exercise could not be completed by June 1997, the launching of the public education and publicity campaign will be deferred to end 1997/early 1998 in the light of progress in the enactment process.
1995 9. To review the establishment of the Mandatory Provident Fund Schemes Authority in the second quarter of 1997. We aim to complete the MPF legislation in 1997. The previous Legislative Council did not have time to discuss the draft MPF legislation in June 1997. We aim to complete the legislation in the 1997-98 session. The timing of the establishment of the Authority will be reviewed at the end of 1997.


The Business Environment

Year Pledge Present Position
Action Completed
1996 1. To correct anomalies in the framework for winding-up companies and facilitate the contracting out of compulsory insolvency work by introducing legislative amendments in 1996-97. The Companies (Amendment) Ordinance 1997 and the Companies (Winding-up) (Amendment) (No. 2) Rules 1997 were passed by the Legislative Council in January 1997 and May 1997 respectively.
Action in Progress: On Schedule
1996 2. To update the statutory framework for the winding-up of companies under the Companies Ordinance based on a review to be completed in 1997 by the Law Reform Commission. The review has been completed and a consultative document to be issued by the Law Reform Commission Insolvency Sub-committee is being prepared.
1996 3. To improve the administration of insolvent estates in 1996 by reviewing and updating the Insolvency Practice Manual and make internal documents and non-statutory forms easier to use. Various non-statutory forms have been revised and made user-friendly. Work has commenced on updating the Insolvency Practice Manual.
1996 4. To make all company forms bilingual and user-friendly. Work on the major forms will be completed by the end of 1996. Major forms were reviewed in 1996 and 11 bilingual forms have been put into use on 10 February 1997 with the implementation of the Companies (Amendment) Ordinance 1997. Review of the less frequently used forms is in progress and scheduled for completion before the end of 1997.
1996 5. To encourage more firms to join the scheme for contracting out of compulsory insolvency work and seek to expand the scheme in 1997 to include other suitably qualified, experienced insolvency practitioners. The Pilot Scheme to contract out cases with less than $200,000 assets has commenced. A larger number of qualified insolvency practitioners have applied to undertake contracting out work.
1994 6. To complete a review of the Trustee Ordinance in 1996. The review was completed in December 1996. Relevant organisations and professional bodies have been consulted on the recommendations of the review.
1994 7. To conduct a comprehensive review of the Companies Ordinance over the next two to three years (1994 to 1997). The review has been completed and the Consultancy Report was released in May 1997 for public consultation.
Action in Progress: Under Review
1995 8. To introduce legislation in the 1995-96 session to provide statutory immunity for auditors of listed companies who report suspected illegal acts by their clients. The Bill was introduced to the previous Legislative Council but a Bills Committee was unable to be formed. In the light of further advice from the Chairman of the Standing Committee on Company Law Reform, we will consider whether to reintroduce the Bill, and whether further consultation with relevant professionals and institutions is necessary.
Action in Progress: Behind Schedule
1996 9. To introduce legislation in 1996-97 to facilitate the administration of companies in financial trouble. The draft Bill is substantially completed. Work is in progress to resolve inconsistencies between the corporate rescue procedures proposed in the Bill and other existing legislation.
1996 10. To streamline procedures in 1996-97 for processing bankruptcy cases by introducing amendments to rules under the Bankruptcy Ordinance. The subsidiary legislation was introduced into the previous Legislative Council in May 1997 but was withdrawn at the request of Members. We hope to reintroduce it into the Provisional Legislative Council as soon as possible.
On-going Commitment
1996 11. To expand the Companies Registry's database in 1997 with the aim of introducing remote, on-line access to key information on companies during 1998.

Data conversion and database expansion are in progress.

The feasibility study for the remote, on-line access system has commenced with a view to introducing the system in 1998.



Economic Analysis and Statistics

Year Pledge Present Position
Action in Progress: On Schedule
1996 1. To refine the population and other related projections in 1997 based on the 1996 By-census. Population projections and other related projects have been completed by end September 1997.
On-going Commitments
1996 2. To facilitate macro-economic analysis by commencing an investigatory study in September 1996 on the compilation of balance of payments (BoP) statistics for Hong Kong. Preparatory work is being done to establish the BoP statistical system which will generate data for economic analysis. In particular, consultation with selected local firms and organisations is in progress to ascertain the methods to be used.
1996 3. To support the promotion of the services sector by providing more statistics on trade in services in 1997-98. Plan for compiling enhanced statistics on trade in services has been completed in respect of the reference year 1995. Similar work for 1996 is in smooth progress.
1996 4. To enhance public access to government statistics in 1997 by improving their availability on the Internet. The Chinese version of the Census and Statistics Department's Home Page was launched in November 1996. A facility is being set up for users to download statistics from the Home Page. More government statistics will be put on to the Home Page.


Preparing for the Transition

Year Pledge Present Position
Action Completed
1996 1. The Companies Registry to receive all documents and returns in either English or Chinese before the end of 1996, subject to the passage of the Companies (Amendment) Bill 1996. The Companies (Amendment) Bill 1996 was enacted on 8 January 1997 and came into effect on 10 February 1997. The Companies Registry now receives all documents and returns in either English or Chinese.
1995 2. To organise the 1997 Annual Meetings of the World Bank and International Monetary Fund in Hong Kong. We have successfully organised the Annual Meetings in September 1997.
Action in Progress: On Schedule
1995 3. To plan to establish a link between the payment systems of Hong Kong and China to facilitate the growing volume of financial transactions between the two economies. We will continue technical discussions with the Mainland for establishing the linkage once the Renminbi payment system moves to a RTGS system (expected to be achieved in 1999).
On-going Commitments
1996 4. To issue Chinese translations of supervisory guideline and instructions for banking returns in early 1997. We have translated major supervisory guidelines such as the Loan Classification System and Risk Management for Derivatives into Chinese and issued bilingual reporting forms for use by authorised institutions. We are finalising the Chinese translation of completion instructions for reporting forms.
1995 5. To strengthen further our liaison with the People's Bank of China (PBoC) on cross-boundary bank licensing issues. We have agreed with PBoC to hold biannual bilateral meetings to discuss banking supervisory matters. We have completed examinations on four branches of Hong Kong banks in the Mainland while PBoC conducted an examination of a mainland bank's operation in Hong Kong. We will continue to provide training for PBoC through seminars and secondment.
1995 6. To strengthen both our bilateral and multilateral contacts with overseas central banks and supervisory authorities. We have held numerous bilateral meetings with central banks in the region. We became a member of the Bank for International Settlements in September 1996. We also actively participated in Basle Committee meetings and in the drafting of the Committee's Core Principles on Banking Supervision. We assumed the Chairmanship of a study group on banking supervision under the Executive Meeting of East Asian Pacific Central Banks and will continue to take an active role in promoting regional central bank co-operation.


Financial Market Infrastructure

Year Pledge Present Position
Action Completed
1996 1. To examine in late 1996 the present state of financial technology infrastructure in Hong Kong, including the use of a secure network for financial transactions. We have completed an evaluation of Hong Kong's financial technology infrastructure. Our next step is to commission consultancy studies for upgrading the infrastructure.
Action in Progress: On Schedule
1996 2. To promote the concept of "Asia Clear", a regional network of linkages between different debt-clearing systems in the East Asia and Oceania regions. We are discussing with a number of central banks in the Region to set up bilateral securities linkages. So far, we have agreed in principle with the Reserve Bank of Australia to establish a bilateral linkage between HKMA's Central Moneymarkets Unit and the Reserve Bank's Information and Transfer System. We are also discussing with the Reserve Bank of New Zealand and the People's Bank of China on similar links.


Progress Report