hong kong banking system group 2. group member list lee tsz ho, kenneth 053174 ip wing chi, joyce...

Hong Kong Banking System

Group 2

Group Member List

Lee Tsz Ho, Kenneth 053174

Ip Wing Chi, Joyce 053161

Chan Shing Yip, Thomas 053230

Leung Yuen Yan, Kathy 053183

Li Piu Nam, Bill 053162

What is the Central Bank in Hong Kong?

The answer is Hong Kong Monetary Authority.

Content

Introduction of Hong Kong Monetary Authority (HKMA)

Comparison

~ HKMA vs. European Central Bank

~ HKMA vs. Bank of Japan

~ HKMA vs. Bank of England Conclusion

Introduction of HKMA

Introduction to HKMA

established on 1 April 1993by merging the Office of the Exchange

Fund with the Office of the Commissioner of Banking

Main functions of HKMA

keeping the Hong Kong dollar stable managing the Exchange Fund promoting the safety of Hong Kong's

banking system developing Hong Kong's financial

infrastructure to enable money to flow smoothly, freely and without obstruction

The HKMA's policy objectives

to maintain currency stability to promote the safety and stability of

the banking system to enhance the efficiency, integrity

and development of the financial system

Supervision of liquidity

Basle Committee on Banking Supervision

maintain adequate liquidity and capital adequacy ratios

Minimum monthly average liquidity ratio of 25%.

Banknotes

issued by the three note-issuing banks– BOC, HSBC, Standard Chartered

required to submit US dollars (at HK$7.80=US$1) to the HKMA

Hong Kong dollar banknotes are fully backed by US dollars held by the Exchange Fund

Coins and Ten dollars banknotes

issued by the Government through the HKMA

settled against US dollars at the rate of HK$7.80 to one US dollar

fully backed by US dollars

Comparison

HKMA and the Central Bank in Different Countries

Comparison

They are …

~ European Central Bank (ECB)

~ Bank of Japan (BOJ)

~ Bank of England (BOE)

Comparison

HKMA and ECB

Comparison between HKMA and ECB

Similarity

~ Aim : to maintain the price stability

~ Supervision of liquidity ( 監察流動資金

充足程度 )

Comparison between HKMA and ECB

Difference

~Copyright of banknotes and coins

European Central Bank

Hong Kong Monetary Authority

Copyright of Banknotes

Copyright of Coins

And ten dollars banknotes

Hong Kong Banknotes

European Banknotes

Comparison

HKMA and BOJ

Attributes / Name HKMA BOJ

Main decision in monetary policies?

Main aim as keeping the price?

Use Open Market Operation?

Main executing organization?

Responsible to supervise and monitor commercial bank?

Issuing all currency within its region?

Government bank?

Responsible for clearing?

Background of Bank Of Japan

Central bank of Japan Juridical person established based on the Bank

of Japan Law Not a private corporation Consists of 3 parts:

– The Policy Board – Bank Executives– Departments, Branches, Local Offices in

Japan, and Overseas Representative Offices

Decision making

Basic stance for monetary policy is decided by the Policy Board at Monetary Policy Meetings (MPM)

the Policy Board:– Discusses economic and financial situation– decides the guideline for money market

operations– announces decisions immediately after the

meeting

Open Market Operation

Monetary policy that involves the buy and sell of securities

influences the volume of money:– By buying and selling Japanese

Government securities (JCG) mainly.

Objectives

Main aim:– maintain the price stability as it provides the

foundation for the nation's economic activity. – The Bank of Japan Law states that the

objectives should be "aimed at, through the pursuit of price stability, contributing to the sound development of the national economy."

Duty

monitor commercial banks and supervised their activity to provide a good business environment

Currency issued

Issuing all of its region’s currency including– 10,000yen, 5,000yen, 2,000yen, 1,000yen

bank notes– 500yen Nickel-brass, 100yen Cupro-nickel,

50yen Cupro-nickel, 10yen Bronze, 5yen Brass and 1yen Aluminum Coin

– Japanese Government Securities

Role

acts as the government bank:– such as treasury funds and Japanese

government securities (JGS) services. The Bank accepts deposits (treasury funds) from the government as government deposits

Clearing

three clearing systems:– the Zengin Data Telecommunication System

(retail credit transfers) – the Foreign Exchange Yen Clearing System (FXY

CS)(mainly yen legs of foreign exchange transactions)

– bill and cheque clearing systems (BCCSs)(bills and cheques collected at regional clearing houses)

Comparison

Bank of England and HKMA

Bank of England

Central Bank of : United Kingdom

Established in : 1694 Headquarters : London Current Inflation : 3.1%

(next due : 15thMay,07) Inflation Target : 2.0%

Resource: http://en.wikipedia.org/wiki/Bank_of_england

Bank of England

Comparison -- SimilaritySame main objective

•Bank of England :

•the bank is committed to promoting and maintaining monetary and financial stability as its contribution to a healthy economy

•HKMA : •the HKMA is the government authority in Hong Kong responsible for maintaining monetary and banking stability

Comparison -- Similarity

Bank of England : debate on issues

relating to the international financial architecture

The HKMA : effectively measure and

report on the risks of major functions, products or business activities

Cautious general risk management policy

Comparison -- Difference

Bank of England : takes a role as a

central bank considers risks

across the system as a whole

The HKMA : is the government

authority in Hong Kong

but not taking the role as the central bank

Role as central bank

Comparison -- Difference

Bank of England : has the power to give

instructions to the bank on interest rates for a limited period

has to meet the inflation target by setting an interest rate

The HKMA : no right to set the

interest rate and inflation target

is primarily determined by the Fed to suit the US

Control the interest rate

Comparison -- Difference

Bank of England : has been issuing

banknotes for over 300 years

gaining and maintaining public confidence in the currency is a key role

The HKMA : does not own the right to

issue banknotes

(except $10 banknotes) but the copyright of coins is

handed by HKMA

Copyright of banknotes

Conclusion

Which monetary system works better out of the above comparison?

Conclusion

The aims of the four central banks are most likely the same

Similar supervision approach on banking system by risk management

Main difference is the issue of notes and coins

Enjoy the highest degree of freedom– Not controlled by the government

An independent authority

– Will not be easily influenced by the government– Report to the public directly

What HKMA Wins

Promotes free market– Let the interest rate flow– Rarely interfere the market

What HKMA Wins (Cont’d)

Our Suggestions

Focus more on the business morals of the banks

Prevent discriminations– E.g. Serving the rich only

Develop a fine supervisory system over the e-banking

Prevent counterfeit money

Reference (Cont’d)

Books: T.Y. Choi, Eric F.K. Chiu (1994) Hong Kong Banking System a

nd Practice. The Chartered Institute of Bankers, HK. T.K. Ghose (1995) The Banking System of Hong Kong. Butterw

orth. Study Group of the Chinese Banks’ Association (1988) Hong K

ong’s Banking System in Transition: Problems, Prospects, and Policies. Asian Research Service

Chen Jianhua (1998) Hong Kong Finance Development in the Future. Guo Shiping. (P.27-31)

Reference

The Hong Kong Monetary Authority Homepage http://www.hkma.com Bank of Europe Homepage http://www.ecb.int/mopo/intro/html/operational.en.html The Bank of England Homepage http://www.bankofengland.co.uk The Bank of Japan http://www.boj.or.jp/ Profiles of Hong Kong Major Service Industries (Banking) http://www.toletrade.com/main/si/spbank.htm Economic Forum (3, Feb, 2005, “A to Z of Money and Banking”) http://www.tdctrade.com/econforum/hkma/hkma050201.htm Economic Forum (22, April, 2004, “Sharing Credit Information”) http://www.tdctrade.com/econforum/hkma/hkma040404.htm

Reference (Cont’d)

Journal, Magazine, Newspaper, and others Speech by the Chief Executive of HKMA (Fri, 20-10-2006) <<One Country, Two financial systems>> Speech by Executive Director (Banking Policy), (7 September 2006) Simon Topping

<< Enhancing disclosure by Hong Kong banks>> SCMP by Louis Beckerling (10-5-2006) <<Size matters for lenders wanting to stay on top>> SCMP by Tvonne Liu (23-8-2006) <<Demand soars for Central office space>> SCMP by Louis Beckering (15-12-2005) <<Sweeteners for deposits could turn sour>> Journal of Economic Issues by Forder, James <<Why Is Central Bank Independence So Widely Approved? >> Journal of Post Keynesian Economics by Fontana, Giuseppe <<The Federal Reserve and the European Central Bank: a theoretical comparison of their l

egislative mandates>> Speech by Andrew Sheng of Deputy Chief Executive Hong Kong Monetary Authority <<Financial Regulation>>

~END~Thankyou!!