Over the years, in dealing with money and banking issues in Hong Kong, the HKMA has used many technical terms that have, in financial markets and in financial reporting, since become day-to-day usage. Some of these terms are specific to Hong Kong. The words highlighted in red can be clicked for links to further information.
Aggregate Balance - the total of licensed banks' balances in their clearing accounts maintained with the HKMA for the account of the Exchange Fund. It is also an indicator of Hong Kong dollar fund flows.
Basel II - alternatively known as the New Capital Accord - a revised, more risk-sensitive framework on capital standards of banks that will be introduced in Hong Kong and elsewhere in the coming two or three years.
Convertibility Undertaking - the undertaking given by the HKMA to licensed banks to sell US dollars to them for the Hong Kong dollar balances in their clearing accounts at the fixed exchange rate of HK$7.80 to US$1.
Deposit Protection Scheme - a scheme being established by the Hong Kong Deposit Protection Board under which each eligible depositor will be paid compensation up to a maximum of HK$100,000 in the event of a bank failure.
Exchange of Letters - the Financial Secretary and the Monetary Authority exchanged letters on 25 June 2003 setting out the division of functions and responsibilities in monetary and financial affairs between them.
Financial infrastructure - a pre-occupation of the HKMA for some years, involving the development of payment, clearing and settlement systems to facilitate the safe and efficient conduct of domestic and international financial activities in Hong Kong.
Governance Sub-Committee of the Exchange Fund Advisory Committee - the body responsible to the Financial Secretary for the governance of the HKMA, comprising non-official and non-banking members of the Exchange Fund Advisory Committee.
Hard landing - something that macro adjustment and control exercised by the Mainland authorities is aiming to avoid in the rapid economic growth and development there.
Intermediation - the important process of channelling savings into investments that justifies the existence of the financial system and financial intermediaries. This function is easily forgotten by market players.
Joint Financial Intelligence Unit (JFIU) - the unit jointly operated by the Police and the Customs and Excise Department for handling suspicious transaction reports on money laundering and terrorist financing.
Know your customer - a critical and essential element in the effective management of banking risks, particularly those relating to money laundering and terrorist financing.
Lender of Last Resort - a function of the HKMA, for safeguarding the stability and integrity of the banking system of Hong Kong by providing support, where necessary, to banks that are basically solvent but are troubled by short-term funding difficulties.
Monetary Base - a part of the liabilities of a central bank. Monetary policy operations centre around the control of this, and central banks do so either on a discretionary basis or by adhering to a monetary rule. Hong Kong, operating a Currency Board system, falls in the latter category.
Negative equity - a problem created in Hong Kong by the bursting of the property bubble in the late 1990s. The problem has greatly diminished over the last 18 months.
Operational risk - the risk of loss resulting from inadequate or failed internal processes, people and systems, or external events.
Positive consumer data sharing - an arrangement whereby authorized institutions and other credit providers share positive credit information of individual borrowers, such as their level of indebtedness, through a credit reference agency.
Qualified Domestic Institutional Investors - a proposed arrangement to channel domestic savings from the Mainland into foreign investments, particularly those in Hong Kong, in a manner that does not undermine, and may help, monetary and financial stability on the Mainland.
Real Time Gross Settlement - an important piece of financial infrastructure that enables instantaneous finality of payments as soon as the transactions have been confirmed and settlement instructions issued.
Supervisory Policy Manual - a document comprising many modules that sets out the HKMA's supervisory policies and practices, the minimum standards on conduct and risk management that licensed banks and other authorized institutions are expected to attain, together with recommendations on best practices.
Tracker Fund of Hong Kong - the unit trust listed on the Hong Kong Stock Exchange in 1999 to dispose of part of the Exchange Fund's Hong Kong equity portfolio.
US Fed funds target rate - a key policy interest rate in the US. The Base Rate under the HKMA's Discount Window is determined with the floor set at this US policy rate plus a premium.
Volatility - the fluctuation in financial markets that provides an incentive to investors but which, if extreme, can destabilise financial systems.
Wealth of Nations - a book, published in 1776, in which Adam Smith argues that (1) the principal human motive is self-interest, (2) the invisible hand of competition automatically transforms the self-interest of many into the common good, and (3) therefore the best government policy for the growth of a nation's wealth is that policy which governs least. This is also the Hong Kong spirit and one reason why Hong Kong continues to be ranked the freest economy in the world.
x - the algebraic expression for an unknown quantity - something that occurs frequently in the many learned papers produced by the Hong Kong Institute for Monetary Research.
Yield curve - the relationship between the percentage yield of a bond and the number of years to its maturity.
Zero interest rates - under the Currency Board system, a consequence of strong inflows into the Hong Kong dollar. The Hong Kong dollar has come close to zero interest rates on a few occasions but has never yet experienced them.
Joseph Yam
3 February 2005
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