HONG KONG MONETARY AUTHORITY Annual Report 1996
HONG KONG MONETARY AUTHORITY
PROPERTY LENDING
Although residential mortgage lending has traditionally been very safe, the risks to the banking sector are increased when asset prices are inflated and when speculative activity is widespread. The growth in residential mortgage lending will therefore require continued close monitoring by both the HKMA and authorised institutions. It is also important that other types of property lending, where the risks tend to be higher (such as loans for property development and investment), are carefully controlled.
The main focus of the HKMA in 1997 will continue to be on ensuring that institutions do not sacrifice prudent lending standards in the face of increased competition. Although the HKMA believes that institutions should pay close attention to the size of their concentration in property exposure, it has been reluctant so far to impose rigid limits on the size or growth of such exposure. A more fundamental solution to the problem of concentration in property exposure is the Mortgage Corporation which will start operation in the second half of 1997. This will add liquidity to authorised institutions' residential mortgage lending portfolios.
TECHNOLOGICAL CHALLENGE
The regulatory and legal framework, as well as the supervisory capability of the HKMA must keep up with the pace of technological and product innovation.
While the HKMA has introduced a legal framework for the regulation of stored value cards, there are likely to be many other issues which need to be dealt with in the area of electronic banking. These include the introduction of new types of electronic money and the increasing use of the internet as a means of delivering banking products and services. These will bring new challenges to the banking industry as well as to the supervisors.
To assist the HKMA to keep abreast of such developments and determine what appropriate measures need to be taken, the HKMA will establish a study group, comprising representatives from the banking industry and relevant experts, to consider the strategic and regulatory issues relating to internet banking and electronic money. The Banking (Amendment) Ordinance 1997 was enacted on 8 January 1997. However, the major part of the Ordinance, including those provisions relating to multi-purpose stored value cards and money brokers, is scheduled for commencement in the second quarter of 1997. Concurrent with the commencement of operations of the Ordinance, the HKMA will update the Guide to Applicants to include new chapters on the authorization criteria for multi-purpose cards and money brokers.