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The Hong Kong Monetary Authority (HKMA) is a government authority founded on April 1, 1993 in Hong Kong from the consolidation of the Office of the Exchange Fund and the Office of the Commissioner of Banking. It reports directly to the Financial Secretary.
Apart from its main responsibility of ensuring monetary and banking stability, it plays an important role in maintaining the stability of the Hong Kong dollar, managing Hong Kong's official reserves, the Exchange Fund, in a way that is sound and effective, keeping Hong Kong's banking system safe and constructing the financial infrastructure of Hong Kong for the smooth and free flow of money in the territory. It is also responsible for the promotion of Hong Kong's safety banking system. All these are governed by the Banking Ordinance and the Exchange Fund Ordinance.
By means of sound management of the Exchange Fund, operations of monetary policy and other suitable measures, the HKMA maintains currency stability under the linked exchange rate system through sound management of the Exchange Fund, monetary operations and other means deemed necessary. The strong official reserves of Hong Kong and the sound and robust banking system are parts of the important underpinnings of the Linked Exchange Rate System. Besides, in an attempt to ensure the safety and stability of the banking system, it not only regulates the banking and deposits-taking business, but also monitors authorized institutions. What’s more, it promotes the efficiency, integrity and development of the financial system, with emphasis on the payment and settlement arrangements.
There are several areas related to policy. They are the Financial Infrastructure, Guide to Authorization, Supervisory Policy Manual, Monetary stability and Banking stability.
Financial infrastructure can be divided into two major parts: Infrastructure and Debt Market Development.
The Central Money markets Unit (CMU), established by the HKMA in 1990 is to provide computerized clearing and settlement facilities for Exchange Fund Bills and Notes. It extended the service to other Hong Kong dollar debt securities in late 1993. It also offers an efficient, safe and convenient clearing and custodian system for Hong Kong dollar debt instruments. A seamless interface between the CMU and the newly launched Real Time Gross Settlement (RTGS) inter-bank payment system was established when the CMU Service was further extended. This enables the CMU system to provide for its members real-time and end-of-day Delivery versus Payment (DvP) services. To enhance the market infrastructure, a Securities Lending Programme for private sector securities were launched by the CMU successfully. Another objective is to enhance the liquidity of private sector debt securities by utilizing securities which held by long-term investors for short-term use by the more active market participants. The settlement efficiency for CMU private sector debt securities is improved and more investors are attracted by enhancing the yields for the lenders.
It includes the exchange of Fund Bills and Notes Insurance Programme, Fund Notes and Notes Fixings. In fact, dealers and market makers are being recognised. Maintaining the Market-making system and the use of Exchange Fund paper as margin collateral are also some of their developments.
Guide to Authorization sets out the HKMA's explanation about the authorization requirements and the grounds for revocation contained in the Banking Ordinance (BO) and the procedures for applications for authorization. It also offers guidance to institutions who are seeking authorization under the BO about the scheme of supervision contained in the BO and the policies and approach of the HKMA in achieving it. It is also relevant to existing Authorized institutions as the authorization criteria continue to apply to them after authorization.
The HKMA's latest supervisory practices and policies are set out in the Supervisory Policy Manual, in order to satisfy the criteria of the BO and recommendations on best practices, the minimum standards authorized institutions (AIs) are expected to attain that AIs should aim to achieve.
This Manual will be rolled out in stages, as batches of modules are finalized. Some of which are still under preparation containing all existing circulars and guidelines issued by the HKMA for reference to readers.