Briefing by the Secretary for Financial Services and the Treasury on the Chief Executive’s 2018 Policy Address
Development of cross-boundary financial services
Mr CHAN Chun-ying enquired about the development progress of cross-boundary financial services between Hong Kong and the Mainland, in particular measures to facilitate Hong Kong people to open bank accounts, obtain mortgage loans and invest in financial management products in the Bay Area.
SFST responded that the Administration and the Hong Kong Monetary Authority (“HKMA”) had been discussing with the People’s Bank of China on the feasibility of allowing Hong Kong people to open bank accounts, obtain mortgage loans and invest in financial management products in the Mainland which would also hinge on the capital account liberalization of the Mainland. As regards the use of Hong Kong e-wallets in the Mainland, SFST said that WeChat Pay HK in conjunction with Union Pay had already introduced support for cross-border mobile payments to allow Hong Kong residents to make payments to certain merchants in the Mainland.
Promoting the development of green finance
Mr CHAN Chun-ying pointed out that private participation was crucial to the development of green finance and enquired whether the Administration would consider, by making reference to the practices of relevant jurisdictions including the United Kingdom (“UK”), establishing an independent green investment bank to foster private capital to invest in green projects, and introducing tax concessions and offering profits tax exemption to funds investing in green finance products.
SFST and Permanent Secretary for Financial Services and the Treasury (Financial Services) (“PS(FS)”) said that the Administration was making progress on various fronts to facilitate the development of green finance in Hong Kong, including promoting local certification for green finance products by the Hong Kong Quality Assurance Agency and introducing the Green Bond Grant Scheme to subsidize qualified green bond issuers in obtaining green bond certification with a grant ceiling of HK$800,000 per issuance. SFST said that the amount of green bonds issued in Hong Kong in the first half of 2018 stood at USD 8 billion. A number of corporations such as the Hong Kong and China Gas Company Limited, and multilateral development banks such as the European Investment Bank had issued green bonds in Hong Kong. PS(FS) added that the Administration planned to introduce a piece of legislation by the end of 2018 to enable different types of onshore and offshore funds operating in Hong Kong to enjoy profits tax exemption on the same footing for transactions in qualifying assets, subject to certain eligibility requirements. This tax arrangement would be applicable for funds investing in green finance products which could fall under the classification of qualifying assets.
Development in financial technologies
Mr CHAN Chun-ying expressed concern about the recent fraud cases relating to FPS where the personal data of some FPS users were stolen and subsequently used to set up e-wallet accounts and electronic Direct Debit Authorization (“eDDA”) for account top-up. Mr CHAN enquired about the Administration’s measures to enhance personal data protection and strengthen the authentication controls of online financial services. Mr CHOW enquired whether stored value facility (“SVF”) operators would be required to verify customer identities via two-factor authentication in the future. Mr SHIU sought clarification on whether bank customers would have to bear the financial losses incurred in the fraud cases.
SFST explained that the incidents were related to the authentication controls of e-wallets rather than the security of FPS. As such, HKMA had requested SVF operators and banks to adopt the refined processes to enhance user protection which included
(a) sending an SMS notification to the e-wallet user to confirm the setting-up of eDDA through FPS;
(b) requiring the user to make a one-time credit transfer from the relevant bank account to his/her e-wallet so as to confirm the wallet user was the same as the bank account owner; or
(c) verification of customer identities via two-factor authentication with banks. SFST supplemented that bank customers would not be liable for the unauthorized transactions and would not bear financial losses as a result.
Enhancing the Mandatory Provident Fund System
Mr CHAN Chun-ying enquired whether the Administration would consider changing the fee charging mechanism of MPF schemes to address the concerns of low returns and high fees, including prescribing the fee levels for CFs with relatively low investment risks and requiring that the fees charged to CFs with high investment risks should be proportionate with their investment returns. Moreover, noting that MPFA planned to start charging MPF approved trustees Annual Registration Fee (“ARF”) to cover its operating expenses which would be determined by reference to the current value of scheme assets of a registered scheme, Mr CHAN asked how the Administration would ensure that the ARF collected would be used efficiently, and whether the Administration would consider suspending the collection of ARF when the ARF collected accumulated to a certain level.
Deputy Secretary for Financial Services and the Treasury (Financial Services)2 (“DS(FS)2”) said that although it might not be feasible to manage different fee charging mechanisms for CFs according to the corresponding levels of risk, MPFA had introduced a number of measures to enhance market transparency and promote competition, including raising the transparency of the fees. As for ARF, DS(FS)2 advised that the Mandatory Provident Fund Schemes Ordinance (“MPFSO”) (Cap. 485) had already provided for the charging of ARF. MPFSO also clearly specified that ARF should only be charged to recover the costs incurred, or likely to be incurred, by MPFA in exercising and performing its functions with respect to registered schemes. As for whether ARF could be suspended subject to a review mechanism, DS(FS)2 responded that the Administration had been discussing with trustees on the proposal, and details including the review mechanism could be further worked out with MPF trustees.
Pro-innovation government procurement
Mr CHAN Chun-ying noted that in order to avoid placing start-ups and SMEs in an unduly disadvantageous position in government procurement, tenderers’ experience would in general not be set as essential requirements under the proposed new procurement regime. He enquired how the Administration could minimize the entry barrier for start-ups and SMEs while allowing the merits of engaging an experienced tenderer to be taken into account in the tender evaluation process.
Permanent Secretary for Financial Services and the Treasury (Treasury) advised that the new pro-innovation government procurement policy aimed to provide a more enabling environment that would encourage bureaux/departments to adopt innovative suggestions and facilitate the participation of start-ups and SMEs in government procurement. Under the new regime, tenderers’ experience should in general not be set as essential requirements so that less experienced tenderers would not be barred from the outset. However, tenderers’ experience might still be assessed in the tender evaluation process, provided that its weighting in the marking scheme should, as a general rule, be capped at 15% of the total technical marks.