Specific US dollar assets of the Exchange Fund that have been designated to back the Monetary Base. A statement of the Currency Board Account, which shows the value of the Backing Assets and the Monetary Base, has been published monthly since March 1999.
The ratio between the Backing Assets and the Monetary Base. When the Currency Board Account was first set up, sufficient US dollar assets were transferred to the Currency Board Account to provide a 105% backing of the Monetary Base (Backing Portfolio). Movements in the Backing Ratio are subject to the effects of changes in the Monetary Base, revaluation gains or losses due to interest rate change, and the size of the net interest income. Net interest income refers to the excess of interest earnings from US dollar assets over interest payments on Exchange Fund paper. Under the Linked Exchange Rate System, although specific Exchange Fund assets have been designated for the Backing Portfolio, all Exchange Fund assets are available to support the Hong Kong dollar exchange rate.
Under a new arrangement approved by the Financial Secretary in January 2000, when the Backing Ratio reaches 112.5% (the upper trigger point), assets will be transferred out of the Backing Portfolio to the Investment Portfolio of the Exchange Fund assets to reduce the ratio to 110%. Conversely, should the ratio drop to 105% (the lower trigger point), assets will be injected from the Investment Portfolio to restore it to 107.5%. This arrangement enables a higher investment return on excess assets while ensuring sufficient liquid assets in the Backing Portfolio.
See also
Backing Assets/Backing Portfolio
.
A statutory write-off, cancellation, conversion into equity or modification of certain liabilities of a failing financial institution, in order to absorb losses of the institution and restore its capital position so as to enable it to carry on business for a reasonable period and maintain market confidence in it. It is one of the stabilization options available under the Financial Institutions (Resolution) Ordinance.
A statistical statement that summarises, for a specific period, the economic transactions of an economy with the rest of world. A complete BoP account comprises the current account and the capital and financial account. In Hong Kong, while the quarterly BoP account is compiled from the reference period of the first quarter of 1999, the annual BoP account dates back to the reference period of 1998.
One of the three types of authorized institution in Hong Kong under the Banking Ordinance. Banks are the only institutions permitted to carry on banking business.
See also deposit-taking company, licensed bank, restricted licence bank and Three-tier Banking System.
An international organisation founded in 1930 to foster international monetary and financial co-operation and serves as a bank for central banks. The BIS provides secretariat support for G-10 and other central banking committees, which include the Basel Committee on Banking Supervision, the Committee on the Global Financial System, the Committee on Payment and Settlement Systems, the Markets Committee, and the Central Bank Governance Steering Group looking into issues relating to the promotion of global financial stability. The HKMA joined the BIS in 1996. In July 1998, the BIS opened its first representative office for Asia and the Pacific in Hong Kong. Between September 1999 and March 2006, the HKMA chaired the Central Bank Governance Steering Group. The HKMA now participates in BIS Annual Meetings, and in some of its committee and working group meetings.
A forum established in 2001 to provide a vehicle for communication between the Asian and Pacific members of the Bank for International Settlements (BIS) and its Board and management on matters of interest and concern to the Asian central bank community. The forum comprises the Governors of the BIS member central banks in the Asia-Pacific region. The HKMA is a member; it chaired the forum from June 2003 to June 2005.
A committee established under the Banking Ordinance to advise the Chief Executive of the Hong Kong Special Administrative Region (CE/SAR) on matters relating to the Banking Ordinance, in particular in relation to banks and the carrying on of banking business. The BAC is chaired by the Financial Secretary. Its members include the Monetary Authority and persons appointed by the Financial Secretary under the delegated authority conferred by the CE/SAR.
See also Deposit-Taking Companies Advisory Committee.
This refers to the on-balance sheet assets and off-balance sheet exposures held by the authorized institutions other than assets and exposures categorised under the trading book.
Under the Banking Ordinance, banking business means the business of either or both of the following:
(a) receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than three months;
(b) paying or collecting cheques drawn by or paid in by customers.
A piece of subsidiary legislation made by the Monetary Authority under section 97C of the Banking Ordinance to prescribe capital requirements for authorized institutions incorporated in Hong Kong, taking into account the risks associated with the institutions.
A piece of subsidiary legislation made by the Monetary Authority under section 60A of the Banking Ordinance to set out the minimum standards for public disclosure which authorized institutions must make in respect of their state of affairs, profit and loss and financial resources (including capital resources and liquidity resources).
The Banking (Disclosure) Rules apply to both locally incorporated and overseas incorporated authorized institutions, except for those falling within certain exemption criteria as specified in the Banking (Disclosure) Rules.
A licence granted by the Monetary Authority under the Banking Ordinance to a body corporate incorporated in or outside of Hong Kong wishing to carry on banking business in Hong Kong. Under the minimum criteria for authorization, certain conditions must be satisfied before a banking licence can be granted.
The statute providing the legal framework for banking supervision in Hong Kong. The Banking Ordinance provides for the authorization and supervision of authorized institutions so as to provide a measure of protection to depositors and to promote the general stability and effective working of the banking system. The Banking Ordinance also provides for the approval and supervision of money brokers. The Banking Ordinance is regularly reviewed in the light of practical experience and to take account of developments in the banking industry.
A tribunal established under section 101A(1) of the Banking Ordinance to hear appeals brought up by authorized institutions against certain decisions made by the Monetary Authority under the Banking Ordinance or its subsidiary legislation in relation to capital, liquidity and disclosure requirements, recovery planning and limitations on exposures and interests.
The HKMA announced in July 1999 a three-year reform programme to further develop the banking sector in Hong Kong. The objectives of the reform programme are twofold: first, to encourage market liberalisation and enhance competitiveness in the banking sector; and, secondly, to strengthen banking infrastructure with the objective of enhancing the safety and soundness of the sector. The package of policy initiatives includes, among others, the removal of the "one-building" condition, deregulation of the Interest Rates Rules, a consultancy study on enhancing deposit protection and a study on the establishment of a commercial credit reference agency. All the policy initiatives contained in the reform programme have been completed.
A committee established in 1996 within the HKMA to consider, advise and make recommendations to the Monetary Authority on major authorization matters under the Banking Ordinance. The principal objectives of the Committee are to ensure that decisions on authorization matters are taken in a fair and reasonable manner and to strengthen internal checks and balances.
A note issued by a bank promising to pay the bearer the par value of the note on demand.
The interest rate forming the foundation upon which the Discount Rates for repurchase-agreement transactions through the Discount Window are computed. The Base Rate is currently set at 50 basis points above the lower end of the prevailing target range for the US federal funds rate or the average of the five-day moving averages of the overnight and one-month HIBORs, whichever is the higher. The HKMA announces the Base Rate every day before the interbank market opens in Hong Kong.
A framework published by the Basel Committee on Banking Supervision in June 2004 for regulating the capital adequacy of banks. Replacing the Capital Accord (also known as Basel I) issued in 1988, Basel II offers implementing jurisdictions a more comprehensive and risk-sensitive framework that aligns regulatory capital requirements of banks more closely with the inherent risks they face. It consists of three pillars:
See also internal ratings-based approach and standardized (credit risk) approach.
A package of regulatory reforms introduced by the Basel Committee on Banking Supervision (Basel Committee), including (i) various enhancements to the international regulatory capital standards and (ii) new international liquidity standards, with a view to promoting the resilience of banks and banking systems to financial stress.
The primary global standard setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters. Its mandate is to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability. It comprises representatives of central banks and supervisory authorities from 28 jurisdictions. The Hong Kong Monetary Authority became a member in 2009.
One of the approaches set out in the Banking (Capital) Rules that authorized institutions incorporated in Hong Kong may choose for the calculation of minimum capital requirements for their credit risk. This approach is essentially a modification of the Capital Accord issued in 1988 (Basel I) and is mainly intended for use, with the prior approval of the HKMA, by authorized institutions with small, simple and straightforward operations.
See also standardized (credit risk) approach.
A legally enforceable arrangement between two parties under which, in the event of a party's default, the amount the non-defaulting party is to receive from (or pay to) the defaulting party is a net sum determined by netting the amounts receivable from and the amounts payable to the defaulting party under all transactions covered by the arrangement.
A company created for the purpose of receiving a transfer, under the Financial Institutions (Resolution) Ordinance, of all or part of a failing financial institution’s issued securities, assets, rights or liabilities and effecting a timely disposal of the same to a purchaser.