HONG KONG MONETARY AUTHORITY Annual Report 1996
HONG KONG MONETARY AUTHORITY
Our regulatory and legal framework as well as our supervisory capability must keep up with the rapid pace of technological and product innovation in the world. The development of internet banking and cyberpayment systems blurs territorial boundaries and has the potential to'virtualise' physical business operations. This will render branch networks less important and raise important questions about licensing policy and protection of depositors while electronic cash may also have implications for the existing note-issuing mechanism and monetary operations.
These are some of the challenges raised by the rapid advances in financial technology. A study group will be formed by the HKMA to review our supervisory policies and requirements, resources and techniques in order to ensure that we can keep up with these developments as they unfold in the coming years.
FINANCIAL INFRASTRUCTURE
During 1996, we also undertook several measures to improve the robustness of our financial infrastructure, and in particular the efficiency, integrity and safety of the payment system, both locally and in the region.
The successful launch of the Real Time Gross Settlement (RTGS) system, one of the most advanced in Asia, in December 1996 greatly enhanced the robustness of Hong Kong's interbank payment system by reducing settlement risk. With the implementation of the RTGS system, real time Delivery versus Payment (DvP) capability has been achieved for all debt securities transactions cleared and settled by the HKMA. The RTGS system has also provided the building block for Payment versus Payment (PvP) for foreign exchange transactions upon establishment of linkages of payment systems between Hong Kong and other economies.
We also laid the foundations for the establishment of a mortgage corporation to promote banking and monetary stability in Hong Kong, as well as to encourage home ownership and help develop the debt market. It is clear that public aspiration and hence demand for home ownership will grow faster than bank assets. The Mortgage Corporation will be a catalytic institution to channel long-term funds to home financing and we see the HKMA playing a role in what essentially is the promotion of more effective financial intermediation in Hong Kong.
INTERNATIONAL FINANCIAL CENTRE
Our objective to strengthen Hong Kong's role as an international financial centre was an essential part of our strategy in 1996. With growing financial markets in Asia, the most effective means of improving financial intermediation is greater central bank co-operation. The HKMA, recognising the diversity in Asian markets, has been taking active part in discussions with other central banks on the potential role of an Asian Monetary Network to facilitate regional financial development in a stable and orderly manner. One of the objectives of this Network is to link up the financial infrastructures of individual markets in Asia to promote more effective financial intermediation.