Speech at Panel on Financial Affairs

Briefing on the work of Hong Kong Monetary Authority

Macroeconomic conditions and measures to help the local economy to combat the coronavirus disease-2019 outbreak

Mr CHAN Chun-ying, commended HKMA for its recent efforts in maintaining Hong Kong’s financial stability and helping the local economy to ride through the challenges arising from the outbreak of coronavirus disease-2019 (“COVID-19”). Relief measures introduced by the banking industry included the Special 100% Loan Guarantee (“the 100% LG”) under the SME Financing Guarantee Scheme (“SFGS”) and the offer of principal payment holiday for various types of borrowers.

Noting that the Hong Kong dollar (“HKD”) had strengthened since early 2020 due to increase in the interest rate spread between HKD and the United States dollar (“USD”) and continuous capital inflow into Hong Kong’s stock market, Mr CHAN Chun-ying sought HKMA’s assessment on the trend. He enquired about the development in loan growth discounting the impact of principal payment holiday for loans.

CE/HKMA said that the two interest rate cuts by the United States (“US”) Federal Reserve in the past two months had led to an increase in arbitrage activities to take advantage of the higher HKD interest rates. As the interest rate differentials were expected to narrow following inflows into HKD, such arbitrage activities would likely subside gradually. Apart from arbitrage activities, demand for HKD would also hinge on other relevant factors including initial public offerings and equity-related funding demand by international investors. DCE(B)/HKMA added that the introduction of principal payment holiday only delayed the repayment of principal of loans and so far HKMA observed no impact on loan growth.

Development of financial infrastructure and application of financial technologies

Mr CHAN Chun-ying enquired about the progress of introducing more credit reference agencies for the banking sector.

On the launch of the Southbound Trading of Bond Connect, CE/HKMA said that HKMA had been liaising with the People’s Bank of China on the matter.As regards Macao’s initiative to establish a bond clearing house, HKMA welcomed the proposal as the bond markets in two places could complement each other. On the introduction of more credit reference agencies for the banking sector, DCE(B)/HKMA said that a number of technical and implementation issues had to be resolved. HKMA had been working closely with the banking industry in taking forward the initiative.

 

Work of the Financial Services Development Council

Resources and corporate governance of the Financial Services Development Council

Mr CHAN Chun-ying enquired about the timetable for FSDC to recruit its new Executive Director after the appointment of Mr Christopher HUI Ching-yu, FSDC’s first Executive Director, as the Secretary for Financial Services and the Treasury (“SFST”) in April 2020. He also expressed concern about the adequacy of resources for FSDC to support its various functions and manpower needs as he noted that FSDC’s Budget for 2020-2021 had only increased slightly over that for 2019-2020.

C/FSDC said that FSDC aimed to recruit a new Executive Director as soon as possible, and had placed a recruitment advisement within one week after the announcement of Mr HUI’s new appointment. Also e-recruitment services had been employed with a view to identifying prospective candidates in a more effective and efficient manner. As regards FSDC’s budgets, C/FSDC said that because of the cancellation of some promotional activities either hosted by FSDC or organized by other bodies which FSDC planned to join, there was operating surplus for the year 2019-2020, and hence the annual budget for 2020-2021 had only increased slightly to $34.3 million, or about 7% increase over that of last year.

Research work of the Financial Services Development Council

Mr CHAN Chun-ying expressed support for FSDC’s key research themes in 2020-2021. He expressed concern that FSDC’s activities like engagement meetings, roundtables and thematic forums for exchanging views with stakeholders and related organizations in Hong Kong and overseas might not be taken forward due to the Government’s order to prohibit group gatherings in public places under the Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (Cap. 599G) in order to curb the spread of COVID-19. He asked whether FSDC would consider other channels for seeking views from stakeholders and related organizations.

C/FSDC said that owing to the spread of COVID-19, FSDC had been using video conferencing to communicate with industry practitioners. According to FSDC’s experience so far, more lead time would be required for making preparations, such as setting up video conferences, and it was also a challenge in leading attendees to express their views during such conferences. FSDC was aware that more firms in the private sector had been using video conferencing services to communicate with their international stakeholders, and FSDC was exploring the feasibility of using such services to help carrying out its research and market promotion work.

 

Annual briefing on the work of the Financial Reporting Council

Manpower and budget of the Financial Reporting Council

Noting that the number of staff in the Department of Investigation and Compliance had dropped by over 20% since the commencement of the new regulatory regime for auditors of public interest entities (“PIE”) on 1 October 2019, Mr CHAN Chun-ying was concerned whether FRC had sufficient manpower to discharge its various functions under the new regime, and enquired whether FRC had set any establishment targets.

C/FRC said that two staff members had been promoted and transferred from the Department of Investigation and Compliance to the Department of Oversight, Policy and Governance and the Department of Inspection during the said period. As regards FRC’s total headcount, it was expected to reach 52 by end-2020 and 63 by end-2021 which would be the optimal level. FRC attached importance to recruiting quality and competent staff for discharging its various functions. It had successfully recruited 8 new staff for the Department of Inspection as at 31 March 2020 and there would be 13 staff for that Department by end-May 2020. FRC would continue to recruit from the market to scale up its talent pool.

Mr CHAN Chun-ying suggested that FRC should refine the presentation of its financial position as shown in page 29 of the powerpoint. For instance, FRC might set out its annual budgeted expenditure, operating expenditure, capital expenditure and anticipated deficit separately, and explain how the deficit could be covered.

C/FRC took note of Mr CHAN Chun-ying’s view. ACEO/FRC said that the item “grant income” was money from the Government’s seed capital, and FRC would not collect the new levies until 1 January 2022. As FRC’s operations during the levy exemption period would be financed by the grant income, no surplus or deficit would be recorded in the period.