Approval of banks' senior management

inSight

26 Jun 2003

Approval of banks' senior management

The HKMA has the authority for giving consent to appointments to the senior management of banks in Hong Kong. The HKMA's practice is to process applications for consent with the minimum delay, subject to the necessary procedures having been followed.

Section 71 of the Banking Ordinance specifies, among other things, that "no person shall become the chief executive of an authorized institution, or a director of an authorized institution incorporated in Hong Kong, without the consent in writing of the Monetary Authority". This is an important supervisory requirement that aims at ensuring, as much as possible, that the appointees to those senior management positions are fit and proper to perform their roles. It is a necessary supervisory tool, which is used also in other banking jurisdictions. For the HKMA, in accordance with the objective laid down in the Ordinance, it serves to help "to provide a measure of protection to depositors".

In considering an application for such consent, the HKMA requires information on the individuals, principally concerning their relevant banking experience in Hong Kong or elsewhere and personal integrity. On the banking experience of individuals, this can be established through information provided by the applicants and from the database we have, over the years, accumulated from information submitted in connection with previous applications for consent, to facilitate the efficient processing of fresh applications. With regard to personal integrity, the reasonable assumption is that, unless there are records that may suggest the contrary, all applicants possess a level of personal integrity that justifies giving consent. We conduct checks with relevant law enforcement agencies and regulators in Hong Kong to ascertain whether there is any adverse record on the applicant. For appointments involving persons or institutions from outside Hong Kong we look to the relevant home regulatory authorities for their comments on the fitness and properness of the applicants for the positions for which they have applied: this includes ascertaining that the candidate neither has committed any offence nor has any record of dishonest acts.

The time taken to process an application for consent depends on the availability of the necessary information. It takes us less time to process the application of someone who is already a director of an authorized institution than someone who has not been a bank director before. It takes us longer to process an application if the necessary comments from other local and overseas regulatory authorities have to be sought and awaited rather than submitted with the application. It takes us less time to process one application than a batch of applications. Whatever the case may be, as a matter of policy, we process applications for consent as quickly as possible. We consider it part of our duty as banking supervisor "to promote the ... effective working of the banking system", as specified in the Banking Ordinance, and this, we think, requires us to process applications for consent as chief executives and directors of authorised institutions without delay. We do not wish to see the business of banking in Hong Kong unnecessarily bogged down by bureaucracy. We are even prepared to entertain, as far as possible, requests for expediting the granting of consents in some urgent cases. This applies to all applicants from all the authorized institutions that we supervise, regardless of the status of the institution or the individuals concerned, and regardless of whether we are dealing with a local institution or an institution with a base outside of Hong Kong.

Figures speak louder than words. In the past year we have had 36 applications from existing directors of authorized institutions who have been subject to our vetting and approved by us within the previous three years. We completed the vetting and approval process for seven of them within one working day, one within two working days, nine within three working days and four within four working days. The above-mentioned 21 applications came from authorized institutions from nine different jurisdictions.

We very much respect the right of the community, which we serve, to question us on how we perform our statutory functions. As much as possible, and without breaching the secrecy provisions of the Banking Ordinance and of other relevant laws, or undermining the effectiveness of our operations, the HKMA has a policy to be transparent in whatever we do. We believe that this is necessary to enhance policy credibility, ensure adequate checks and balance on our statutory authority, and provide a mechanism for public scrutiny and monitoring of our activities. I think we have, over the years, built up a track record of fairness and openness, and we will persevere in this effort, in order to earn and maintain the trust of the community - a trust that is so important to monetary and banking stability in Hong Kong.

 

Joseph Yam

26 June 2003

 

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Last revision date : 26 June 2003