Speech at Panel on Financial Affairs

Proposal on creation of a supernumerary Chief Superintendent of Police post

Candidate of the supernumerary post, and the need of creating a permanent post

Mr CHAN Chun-ying said that he supported the proposal. Given that the work of FIIB, in particular that relating to developing intelligence and conducting financial investigations, was continuous in nature, he enquired if the Administration had considered creating a permanent CSP post to head FIIB.

DS(FS)1 said that as explained in CE’s 2020 Policy Address, the Administration was aware that LegCo Members had reservations about creating permanent directorate posts under the current economic environment. The Administration shared the same view that the CSP post was pertinent to enhancing the AML/CTF regime of Hong Kong. Considering the need to create the CSP post, the Administration proposed to create a supernumerary post for five years at this stage. The Administration would take into account Members’ suggestion of creating a permanent post in reviewing the way forward of the CSP post in future.

Duties and responsibilities of the Financial Investigation Division, Joint Financial Intelligence Unit and Headquarters (Financial Investigation)

Mr CHAN Chun-ying sought information on parties including overseas counterparts for which HQ(FI) had provided financial investigation and intelligence collection training, and overseas training provided to police officers involved in financial investigation and intelligence work. Moreover, he requested the Administration to provide a breakdown on the number of suspicious transaction reports (“STRs”) received by JFIU from various sectors from 2017 to 2020, particularly the number of such reports from the financial sector, including traditional banks and virtual banks.

ACP(Crime) responded that HKPF had provided training, including overseas training in Australia and Singapore, on financial intelligence and investigation for police officers. HKPF had also organized similar training programmes in Hong Kong for overseas counterparts, such as neighboring South-east Asian countries. He undertook to provide supplementary information on STRs as requested by Mr CHAN after the meeting.

(Post-meeting note: The Administration’s supplementary information was circulated to members vide LC Paper No. CB(1)822/20-21(02) on 22 April 2021.)

Resolution to raise the maximum amount of borrowings under the Government Bond Programme

Development of the retail bond market

Mr CHAN Chun-ying expressed support for the Administration’s proposal, and considered that the Administration should increase the issuance sizes of future batches of iBond and Sliver Bond. Noting that the percentage of first-time investors for iBond had decreased in recent years while that for the Silver Bond had increased, Mr CHAN enquired whether the Administration had examined the reasons involved. With the proposed increase in the borrowing ceiling under GBP, he also enquired whether the Administration had plans to diversify the types of bond products under GBP, such as bonds for financing large infrastructure works.

Regarding development of the local retail bond market, USFST advised that since the establishment of GBP, the Administration had issued seven batches of iBond and five batches of Silver Bond, which had met with warm market reception and over-subscription. The Administration planned to issue green bonds for retail investors. The Financial Secretary had also announced in the 2021-2022 Budget of the formation of a steering committee to formulate strategies and a roadmap for promoting the diversified development of Hong Kong’s bond market and reinforcing its position as a global bond centre. USFST stressed that in promoting the development of a retail bond market, the Administration had to be mindful of the need to strike a proper balance between market development and investor protection.

On the subscription of iBond and Silver Bond, DCE/HKMA explained that the percentage of first-time bond investors for Silver Bond had increased steadily in recent years as the Administration had gradually increased the minimum interest rate of Silver Bond (from 2% for the inaugural Silver Bond issued in 2016 to 3.5% for the latest batch issued in 2020), which had helped boost the attractiveness of the product to the target investors (i.e. senior citizens aged 65 or above). On the other hand, the target investors of iBond covered a much wider age group of the population. As iBond was re-launched in 2020 after a 3-year suspension from 2017 to 2019, it was reasonable to expect that public attention might take some time to pick up. He added that the Administration would continue to review measures to promote the issuance of iBond and Sliver Bond.

Resolution to expand the scope of and raise the maximum amount of borrowings under the Government Green Bond Programme

Recognition of green projects under the Government Green Bond Programme

Mr CHAN Chun-ying expressed support for the Administration’s proposal, and sought comparison on the coverage of green projects under GGBP and the relevant schemes implemented by other comparable jurisdictions. Pointing out that the lack of widely recognized international standards for formulating frameworks, which set out how organizations should issue green bonds and what green projects should be funded for improving the environment and facilitating the transition to a low carbon economy, was among the major obstacles in the development of green bond market, Mr CHAN enquired whether the Green Bond Framework (“GBF”) developed by the Administration had been recognized by international investors, and Administration’s plans to review and update GBF.

USFST and DCE/HKMA advised that the Administration had made reference to the Green Bond Principles 2018 of the International Capital Market Association (which was a green bond standard widely recognized by the international community) in developing Hong Kong’s GBF. Under the existing mechanism, the green projects would only be considered eligible if they had met the eligibility criteria outlined in GBF. The Administration would also publish a green bond report annually to set out the details and quantifiable positive environmental impacts of the green projects funded by GGBP. Information contained in the green bond reports would be certified by the Hong Kong Quality Assurance Agency, an organization providing third-party conformity assessments for green finance issuers in Hong Kong. USFST further pointed out that the International Platform on Sustainable Finance had set up a working group led by the European Union Commission and the relevant Mainland authorities to formulate a Common Ground Taxonomy (“CGT”). The Administration aimed to adopt CGT with a view to aligning Hong Kong’s requirements with those of these major markets.

Development of green finance

With regard to the Administration’s plan to consolidate the Pilot Bond Grant Scheme and the Green Bond Grant Scheme to form the Green and Sustainable Finance Grant Scheme (“GSFGS”) for providing subsidies to eligible bond issuers and loan borrowers to cover their expenses relating to bond issuance and external review services, Mr CHAN Chun-ying asked whether the Administration would implement other measures, such as providing tax incentives having regard to similar practices of overseas jurisdictions, to promote the development of green finance in Hong Kong.

USFST responded that the Administration would announce the details of GSFGS in due course. He also pointed out that under the Inland Revenue Ordinance (Cap. 112), tax relief would be provided for qualifying debt instruments that had met the relevant eligibility criteria.

Protection of Personal Information on the Companies Register

Implementation of the new inspection regime

Mr CHAN Chun-ying expressed support for the proposal as they considered that the New Inspection Regime would strike a reasonable balance between personal data protection and allowing adequate public access to necessary personal information in ascertaining the particulars of the directorship and other key officers of companies. Mr CHAN Chun-ying enquired if the Administration would consider advancing the commencement of Phase 2 to before October 2022.

SFST advised that the full operation of the New Inspection Regime would involve substantial system and operation modifications of CR’s information system, namely the Integrated Companies Registry Information System (“ICRIS”), which contained voluminous information including information of some 1.4 million registered companies, personal particulars of over 4 million current directors or former directors of live companies and that of over 2 million directors of dissolved companies. It would take time to revamp ICRIS to cater for the implementation of the New Inspection Regime to ensure smooth functioning of the company registration and search services of CR. He further said that the Administration had been maintaining close liaison with the commercial and financial sectors on the New Inspection Regime. It was noted that most business associations in Hong Kong including the Chamber of Hong Kong Listed Companies had indicated support for the New Inspection Regime. The Administration was aware that the public had concerns over the new regime and appreciated that it would take time for the community to understand the operation and new arrangements.

List of specified persons

Mr CHAN Chun-ying said the banking and liquidation/bankruptcy sectors were concerned that the New Inspection Regime might create burden on their work and increase their operating costs. He called on the Administration to develop measures to facilitate access of Protected Information by genuine users with legitimate purposes, such as allowing liquidators to access the Protected Information of not only the company under liquidation but also its related companies as such information would be useful for the liquidators in performing their duties.

SFST advised that under the New Inspection Regime, the Protected Information would be made accessible to specified persons upon application. Specified persons would include the data subject, a liquidator, a trustee in bankruptcy, a public officer or public body, a law enforcement agency, etc. Hence, financial institutions might obtain consent from the data subjects for accessing the Protected Information when conducting the due diligence procedures.