Speech on Legislative Council Meeting – Reviewing and reorganizing the Government structure

MR CHAN CHUN-YING (in Cantonese):

Deputy President, since the reunification in 1997, successive terms of the SAR Government have reorganized the Government Secretariat and its Policy Bureaux, in a bid to tie in with the political, economic, and social developments. One example was the implementation of the Accountability System for Secretaries of Departments or Directors of Bureaux. While the reorganization proposal put forward by the current-term Government upon its inauguration failed to be passed, a new Innovation and Technology Bureau was successfully established a year ago. The new bureau has been effective in facing up to challenges from various fronts and keeping up the development momentum of the city. With five Members having expressed their views on the current structure of the Government just now, I would like to focus my speech on the financial area. Building on the principle of “one country, two systems”, Hong Kong’s financial industry has continued to expand both in its depth and its breadth since the reunification 20 years ago. According to open information, Hong Kong is the world’s leading capital formation centre. The Stock Exchange of Hong Kong also topped the world in terms of the funds raised from the initial public offering activities for two consecutive years in 2015 and 2016.   Hong Kong is also a leading international fund management centre, registering the combined fund management business of HK$17,400 billion in 2015. Hong Kong has the highest insurance density in Asia, with the per capita premium at HK$49,000. According to the survey on “Foreign Exchange Market” published last year by the Bank for International Settlements, the daily average turnover of foreign exchange trades involving Renminbi (“RMB”) reached US$77.1 billion in Hong Kong, taking over Singapore and the United Kingdom to become the world’s largest market for foreign exchange transactions involving RMB.   As the Chief Secretary for Administration has mentioned just now, following the introduction of the Shenzhen-Hong Kong Stock Connect last December, the launch of the Shanghai-Hong Kong Stock Connect pilot programme in 2014, and the mutual recognition of funds arrangement between the Mainland and Hong Kong in 2015, investment products in the two markets can be further diversified and mutual access of their products be further enhanced. We can say that here in Hong Kong, business opportunities are countless and the prospect is very promising. However, the financial industry is highly regulated. To maintain Hong Kong’s position as an international financial centre, we have to explore new financial businesses which could meet the international regulatory standards.   It is achievable by seizing new opportunities in response to market changes while devising new regulations correspondently. The financial supervisory models are undergoing changes in countries all over the world, from segregated supervision to universal supervision; from institutional supervision to functional supervision, from one-way supervision to all-rounded supervision, and from closed supervision to open supervision.   Despite the changes, it is fair to say that not any single model is necessarily superior to the other. The dominant rule is to make adjustments according to places and occasions. The Secretary of Department, bureaux, and public organizations which are responsible for financial management for this term of Government include the Financial Secretary, the Financial Services and the Treasury Bureau, the Financial Services Development Council (“FSDC”), the Hong Kong Monetary Authority (“HKMA”), the Securities and Futures Commission (“SFC”), the Office of the Commissioner of Insurance, the Mandatory Provident Fund Schemes Authority, etc. Let us use HKMA to illustrate the point.   HKMA is tasked with multiple roles.   In addition to be the regulator of the banking industry, the manager of the Exchange Fund and the licensing authority of the Stored Value Facilities, HKMA also performs the functions of the Infrastructure Financing Facilitation Office. Apart from being a market regulator, licensing authority and supervisor of intermediaries, SFC also plays a leading role in exploring overseas markets. FSDC, which claimed to be a high-level, cross-sectoral government advisory body newly established by the current-term Government, does not have its own staff establishment so far.   How can it take up the important role of examining the development of the Hong Kong financial services industry and promoting the local financial industry?   It is beyond comprehension. I trust many people will agree that the financial management structure in Hong Kong is well-established and earns world recognition. HKMA’s Chief Executive, was just appointed by the Financial Stability Board as the Chair of its Standing Committee on Supervisory and Regulatory Cooperation, a proof that Hong Kong’s supervisory level is recognized globally. Nevertheless, the situation of FSDC is a good example to remind us that there is no room for complacency.   In fact, Hong Kong’s financial management structure still has room for improvement. I expect that the Government of the next term could expeditiously conduct a comprehensive review to rationalize the management and structure of the local financial industry. There should be segregation of functions and counter-balance in the areas of policy formulation, business management, business development, as well as supervisory management, so that the industry can keep up with the times and achieve a balance between supervision and development. This will enable Hong Kong to grasp the opportunities for rapid development in several or even 10 or 20 years ahead, and to ensure that Hong Kong’s position as an international financial centre can be further strengthened and enhanced.

Deputy President, I so submit.