Hong Kong Monetary Authority

Hong Kong Monetary Authority
香港金融管理局
Logo of the Hong Kong Monetary Authority
Headquarters	International Finance Centre, Finance Street, Central
Established	1 April 1993 (1993-04-01)
Chief Executive	Norman Chan
Central bank of	Hong Kong
Currency	Hong Kong dollar HKD (ISO 4217)
Bank rate	0.50%
Interest on reserves	None
Website	Hong Kong Monetary Authority

The Hong Kong Monetary Authority (HKMA, Chinese: 香港金融管理局 or 金管局) is Hong Kong's currency board and de facto central bank. It is a government authority founded on 1 April 1993 when the Office of the Exchange Fund and the Office of the Commissioner of Banking merged. The organisation reports directly to the Financial Secretary.^[1]

Responsibilities

The fund was established and managed originally by the Currency Ordinance in 1935. It is now named the Exchange Fund Ordinance.

Under the Exchange Fund Ordinance, the HKMA's primary objective is to ensure the stability of the Hong Kong currency, and the banking system. It is also responsible for promoting the efficiency, integrity and development of the financial system.^[2]

The HKMA issues banknotes only in the denomination of ten Hong Kong dollars. The role of issuing other banknotes is delegated to the note-issuing banks in the territory, namely The Hongkong and Shanghai Banking Corporation, Standard Chartered Bank and Bank of China.

Policies

The official reserves of Hong Kong and the banking system are important underpinnings of the linked exchange rate system.

Tools

Since 1995, the HKMA has entered into a stability pact with central banks in Malaysia, Thailand, Indonesia and Australia to engage in repurchase agreements, which provide liquidity on a two-way basis.^[3]

Infrastructure

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The Central Moneymarkets Unit (CMU), established in the 1990, provides computerised clearing and settlement facilities for Exchange Fund Bills and Notes. It extended the service to other Hong Kong dollar debt securities in late 1993. A seamless interface allow the co-existence of the CMU and the newly launched real-time gross settlement (RTGS) inter-bank payment system. This enables end-of-day delivery versus payment (DVP) services as opposed to Non-DVP.

Monetary stability

Currency board system

It is included the Linked Exchange Rate System and noticeable features such as the Aggregate Balance, Certificates of Indebtedness and coins issued and the Outstanding Exchange Fund Bills and Notes.

The Interest Rate Adjustment Mechanism is an automatic system that maintains the stability of the Hong Kong dollar exchange rate. Lately the HKMA has been disclosing the forecast change in the Aggregate Balance attributes to increase the transparency of the Currency Board operation.

In 1995, Nobel Prize–winning economist Milton Friedman mistakenly predicted the Hong Kong dollar's demise within two years of the 1997 handover. He also predicted the absorption of the territory's financial reserves of US$43 billion (HK$335.4 billion) by Beijing, which would not be able to bear the subrogation of Hong Kong's monetary policy to the United States.^[4]

As with any monetary system not based on a fiat money (which includes currency boards, currency unions and the traditional gold standard) it is impossible to use monetary policy to stabilise the business cycle: this means that any macroeconomic adjustment has to be achieved by changes in the prices of assets and labour. In Hong Kong, this is made easier by two factors: the first is the openness of the economy, with an aggregate demand heavily dependent on international trading partners; this reduces the risk of classic liquidity traps. The second factor is the scarce political clout of the trade unions, which makes it easier to trim the nominal salaries during recessionary times.^[5] Moreover, the high saving rates and the moral stigma attached to bankruptcy have kept relatively low the level of defaults on mortgages even during the deep recessions after the 1997 Asian financial crisis and the SARS epidemic in 2002/2003.

Exchange fund

The fund was established and managed originally by the Currency Ordinance in 1935. It is now named the Exchange Fund Ordinance.

Under colonial rule, the HKMA did not place funds with local banks not rated by Moody's Investors Service or Standard & Poor's. Only the three note issuing banks could receive deposits because they had been rated by "objective international standards".^[6]

During the Asian financial crisis, currency speculators sold the Hong Kong dollar heavily and shorted local stocks and Hang Seng Index futures. The government controversially used the exchange fund to acquire HK$120 billion (US$15 billion) worth of blue-chip shares in a two-week market intervention, beginning 12 August 1998 with the aim of punishing and deterring currency speculators.^[7] The intervention was widely criticised as being detrimental to the reputation as one of the world's financial centres. Instead of being a regulator, the government has become "a player, a very key player".^[8]

In hindsight, one speculator said : "Government intervention raised public confidence in the market when it was near total collapse. It prevented a bigger crisis and saved the market."^[9]

Most stocks acquired during that operation were successively disposed with the creation of a tracker fund, the TraHK. That reduced the portfolio of HK equities to 5.3% of the reserves in 2003. However, the percentage crept back and had risen above 10% by the year 2006.

In August 1998, as part of its wider remit to protect the currency, the authority lent the Thai government US$1 billion from the fund as part of a $17 billion bailout organised by the International Monetary Fund (IMF).^[2]

Banking stability

Banking stability mainly depends on the banking system and supervision. A three-tier system was implemented in the 1980s. Institutions are also managed differently depending on whether they are categorised as licensed banks, restricted license banks or deposit-taking institutions. Overseas banks may also establish local representative offices in Hong Kong.

Location

HKMA building entrance

HKMA Information Centre

The HKMA's is headquartered in the International Finance Centre. It purchased fourteen floors in Tower 2.^[10] The 55th, 56th and the 77th to 88th floors were bought for US$480 million in 2001.^[11] An exhibition area, currently containing an exhibit of Hong Kong's monetary history, and a library of the Hong Kong Monetary Authority Information Centre occupy the 55th floor.^[12] The 88th floor of the tower contains the office of the chief executive of the HKMA, and is served by an individual lift.

Chief Executive

№	Name (birth–death)	Photo	Term of office
№	Name (birth–death)	Photo	Start of term	End of term	Duration
1	Joseph Yam (1946-)		1 April 1993	1 October 2009	7008520732800000000♠16 years, 183 days
2	Norman Chan (1954–)		1 October 2009	Incumbent	7008227124000000000♠7 years, 72 days

Other

The Hong Kong Monetary Authority hosted the meeting of the World Bank and IMF in 1997, at an estimated cost of HK$485 million. Yam hoped that hosting the event would cement Hong Kong's status as an international financial centre. He added: "The presence of the world's leading finance ministers, central bank governors and top commercial bankers in Hong Kong so soon after the change of sovereignty will help boost international and local confidence in Hong Kong".^[13]

References

↑ HK gov. "www.info.gov.hk/hkma/ar2005/english/summary/pdf/hkma.pdf." Info HK Gov. Retrieved in 2006.
1 2 Noel Fung, Government power over Exchange Fund's stability role under review, The Standard, 18 November 1997
↑ Sean Kennedy, Yam defends central bankers' pact, The Standard, 22 November 1995
↑ Chan Po-chung, Dollar demise remark angers HKMA, The Standard, 20 February 1995
↑ Tony Latter, Why blame the peg?, HKMA Quarterly Bulletin, May 2002
↑ Geoffrey Crothall, Banker's fury at 'colonial system', The Standard, 14 September 1995
↑ Bayani Cruz, We will hold on to blue-chip shares: Tsang, The Standard, 29 August 1998
↑ Michael Wong and Teresa Lee, Chan defends 'special action' to prevent currency chaos, The Standard, 16 August 1998
↑ Amy Nip, Soros manager regrets attack on HK dollar, The Standard, 5 July 2007
↑ Lau, Eli (22 September 2003). "SHKP net profit tipped to drop 24.6pc". The Standard. Retrieved 27 March 2007.
↑ Tong, Sebastian (7 April 2003). "HKMC 'to pay $90m' for lease at Two IFC". The Standard.
↑ "HKMA Information Centre". Hong Kong Monetary Authority. Retrieved 27 March 2007.
↑ Sean Kennedy, Yam defends IMF cost, The Standard, 7 July 1995

External links

Hong Kong currency

Topics	Banknotes of the HKD Coins of the HKD Hong Kong dollar

Coinage	1 mil 1¢ 5¢ 10¢ 20¢ 50¢ $1 $2 $5 $10

Banknotes	1¢ 5¢ 10¢ $1 $5 $10 $20 $25 $50 $100 $150 $500 $1000

Banknote issuers	Bank of China (Hong Kong) Hong Kong Monetary Authority The Hongkong and Shanghai Banking Corporation Standard Chartered Bank (Hong Kong) The Oriental Bank Corporation Mercantile Bank of India, London and China

Hong Kong Government

Executive Council Government Secretariat

Bureaus	Civil Service Commerce and Economic Development Constitutional and Mainland Affairs Development Education Environment Financial Services and the Treasury Food and Health Home Affairs Innovation and Technology Justice Labour and Welfare Security Transport and Housing

Departments	Agriculture, Fisheries and Conservation Architectural Services Buildings Census and Statistics Civil Aviation Civil Engineering and Development Correctional Services Customs and Excise Disciplined Services Drainage Services Electrical and Mechanical Services Environmental Protection Fire Services Food and Environmental Hygiene Government Dockyard Government Flying Service Government Logistics Government Records Service Health Highways Home Affairs Hong Kong Police Force Hongkong Post Housing Immigration Information Services Inland Revenue InvestHK Land Registry Lands Legal Aid Leisure and Cultural Services Marine Maritime Rescue Co-ordination Centre Observatory Radio Television Hong Kong Social Welfare Trade and Industry Transport Water Supplies

Statutory agencies or authorities	Airport Authority Antiquities Advisory Board Antiquities and Monuments Office Audit Commission Auxiliary Medical Service Central Policy Unit Centre for Health Protection Civil Aid Service Construction Industry Council Centre for Food Safety Communications Authority Economic Analysis and Business Facilitation Unit Examinations and Assessment Authority Exchanges and Clearing Export Credit Insurance Corporation Heung Yee Kuk Housing Authority Housing Society Hospital Authority Independent Insurance Authority Liquor Licensing Board Office of the Ombudsman Science and Technology Parks Corporation Sales of First-hand Residential Properties Authority Securities and Futures Commission Tourism Board Town Planning Board Trade Development Council West Kowloon Cultural District Authority Urban Renewal Authority

Central Bank	Hong Kong Monetary Authority

Foreign relations	Foreign relations of Hong Kong

Statutory bodies in Hong Kong List of Hong Kong government agencies Hong Kong Civil Service

Economy of Hong Kong

History	Seamen's strike of 1922 Black Saturday (1983) Four Asian Tigers Ting Hai effect 1997 Asian financial crisis Stock disasters in Hong Kong Brand Hong Kong Positive non-interventionism Tai-pan Poverty Campaign: Speak Up Pearl River Delta

Currency	Hong Kong dollar Hong Kong Mint Hong Kong Note Printing Banknotes of the Hong Kong dollar Coins of the Hong Kong dollar

Industry and Business	List of companies of Hong Kong Agriculture and aquaculture in Hong Kong CSI Cross-Straits 500 Index Hong Kong Export Credit Insurance Corporation

Government agencies	Hong Kong Trade Development Council Hong Kong Monetary Authority Inland Revenue Department Agriculture, Fisheries and Conservation Department

Employment and Tax	Employment in Hong Kong Estate Duty Ordinance Goepfert case Inland Revenue Ordinance Partnership taxation Profits tax Rates (tax) SDO s45 Transfer between associated bodies corporate Salaries tax Minimum Wage Ordinance Stamp Duty Ordinance Stamp duty Goods and Service Tax

Infrastructure and Transport	Port of Hong Kong Hong Kong–Zhuhai–Macau Bridge

Rankings	International rankings of Hong Kong

Finance and Banking	Hong Kong Futures Exchange Hong Kong Exchanges and Clearing Securities and Futures Commission Hong Kong Stock Exchange Hong Kong Securities Institute Linked exchange rate P Chips Frauds Red chips Electronic Payment Services Growth Enterprise Market Hong Kong Mercantile Exchange Hang Seng Index

Agreements	CEPA Ship Registration in Hong Kong Outward Processing Arrangement

Energy	List of power stations in Hong Kong

Other	Water supply in Hong Kong Individual Visit Scheme Economic freedom

See also: Economy of Macau Economy of Asia

Financial Secretary

Financial Secretary: KC Chan (Acting)

Subordinate departments	Economic Analysis and Business Facilitation Unit Hong Kong Monetary Authority

Previous office holders *	Martin Mercer Ricnaecker Forth Russell Lister Wodehouse May (acting) Mitchell-Innes Thomson (acting) Smith Thomson Messer Taylors Caine Butters Follows Clarke Cowperthwaite Haddon-Cave Bremridge Jacobs Macleod D. Tsang Leung Tang J. Tsang Chan (Acting)

* Includes previous Colonial Treasurers

Central banks

Global

Global	Bank for International Settlements Basel Committee on Banking Supervision Financial Stability Board

By continent

Africa	Bank of Central African States Central Bank of West African States Bank of Algeria National Bank of Angola Bank of Botswana Bank of the Republic of Burundi Bank of Cape Verde Central Bank of the Comoros Central Bank of the Congo Central Bank of Djibouti Central Bank of Egypt Bank of Eritrea National Bank of Ethiopia Central Bank of The Gambia Bank of Ghana Central Bank of the Republic of Guinea Central Bank of Kenya Central Bank of Lesotho Central Bank of Liberia Central Bank of Libya Central Bank of Madagascar Reserve Bank of Malawi Central Bank of Mauritania Bank of Mauritius Bank Al-Maghrib (Morocco) Bank of Mozambique Bank of Namibia Central Bank of Nigeria National Bank of Rwanda Central Bank of São Tomé and Príncipe Central Bank of Seychelles Bank of Sierra Leone Central Bank of Somalia Bank of Somaliland South African Reserve Bank Bank of South Sudan Central Bank of Sudan Central Bank of Swaziland Bank of Tanzania Central Bank of Tunisia Bank of Uganda Bank of Zambia Reserve Bank of Zimbabwe

Americas	Central Bank of Argentina Central Bank of Aruba Central Bank of The Bahamas Central Bank of Barbados Bermuda Monetary Authority Central Bank of Brazil Bank of Canada Central Bank of Chile Bank of the Republic (Colombia) Central Bank of Cuba Central Bank of Curaçao and Sint Maarten Eastern Caribbean Central Bank Cayman Islands Monetary Authority Central Bank of Ecuador Bank of Guatemala Bank of the Republic of Haiti Central Bank of Honduras Bank of Jamaica Bank of Mexico Central Bank of Nicaragua Central Reserve Bank of Peru Central Bank of Suriname Central Bank of Trinidad and Tobago Federal Reserve System (United States) Central Bank of the Uruguay Central Bank of Venezuela

Asia	Da Afghanistan Bank Central Bank of Bahrain Bangladesh Bank Royal Monetary Authority of Bhutan Brunei Currency and Monetary Board Autoriti Monetari Brunei Darussalam National Bank of Cambodia People's Bank of China Hong Kong Monetary Authority Reserve Bank of India Bank Indonesia Central Bank of the Islamic Republic of Iran Central Bank of Iraq Bank of Israel Bank of Japan Central Bank of Jordan National Bank of Kazakhstan National Bank of the Kyrgyz Republic Bank of Korea Central Bank of the Democratic People's Republic of Korea Central Bank of Kuwait Banque du Liban Monetary Authority of Macao Bank Negara Malaysia Maldives Monetary Authority Bank of Mongolia Central Bank of Myanmar Nepal Rastra Bank Central Bank of Oman State Bank of Pakistan Palestine Monetary Authority Bangko Sentral ng Pilipinas Qatar Central Bank Saudi Arabian Monetary Authority Monetary Authority of Singapore Central Bank of Sri Lanka Central Bank of Syria Central Bank of the Republic of China (Taiwan) Bank of Thailand Central Bank of Turkmenistan Central Bank of the United Arab Emirates Central Bank of Uzbekistan State Bank of Vietnam Central Bank of Yemen

Europe	European Central Bank (Eurosystem) National Bank of the Republic of Abkhazia Bank of Albania Central Bank of Armenia National Bank of Austria Central Bank of Azerbaijan National Bank of the Republic of Belarus National Bank of Belgium Central Bank of Bosnia and Herzegovina Bulgarian National Bank Croatian National Bank Central Bank of Cyprus Czech National Bank Danmarks Nationalbank (Denmark) Deutsche Bundesbank (Germany) Bank of England Bank of Estonia Bank of Finland Banque de France National Bank of Georgia Bank of Greece Hungarian National Bank Central Bank of Iceland Central Bank of Ireland Banca d'Italia Central Bank of Kosovo Bank of Latvia Bank of Lithuania Central Bank of Luxembourg National Bank of the Republic of Macedonia Central Bank of Malta National Bank of Moldova Central Bank of Montenegro De Nederlandsche Bank Norges Bank Central Bank of the Turkish Republic of Northern Cyprus National Bank of Poland Banco de Portugal National Bank of Romania Central Bank of Russia National Bank of Serbia National Bank of Slovakia Bank of Slovenia Gosbank (Soviet Union) Bank of Spain Swedish National Bank Swiss National Bank Central Bank of the Republic of Turkey National Bank of Ukraine

Oceania	Reserve Bank of Australia Reserve Bank of Fiji Reserve Bank of New Zealand Bank of Papua New Guinea Central Bank of Samoa Central Bank of Solomon Islands National Reserve Bank of Tonga Reserve Bank of Vanuatu

Policies and implementation

Policies	Capital requirement Contractionary monetary policy Expansionary monetary policy Basel II Basel III Basel 4

Implementation	Capital control Discount rate Interest rates Money creation Open market operation Sovereign wealth fund

Bretton Woods system

International Monetary Fund World Bank Group International Bank for Reconstruction and Development International Centre for Settlement of Investment Disputes International Development Association International Finance Corporation Multilateral Investment Guarantee Agency

Lists

List of central banks Central banks and currencies of Africa Central banks and currencies of Asia-Pacific Central banks and currencies of the Caribbean Central banks and currencies of Europe Central banks and currencies of Central America and South America

Names in italics indicate non-sovereign (dependent) territories, former countries, or states with limited recognition

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