The Exchange Fund's statutory purpose, as defined in the Exchange Fund Ordinance, is primarily to affect, either directly or indirectly, the exchange value of the currency of Hong Kong. Its functions were extended with the enactment of the Exchange Fund (Amendment) Ordinance 1992 by introducing a secondary and subsidiary purpose of maintaining the stability and integrity of Hong Kong's monetary and financial systems, with a view to maintaining Hong Kong as an international financial centre. Underpinned by such purpose, the Exchange Fund has played a crucial role in helping Hong Kong weather various banking and financial crises in the past few decades.
The Last Line of Defence in Times of Crises
In the 1980s when several banks were on the brink of closure, the Government used the Exchange Fund to take over or provide guarantee for the banks.
During the stock market crash in 1987, the Government used the Exchange Fund to support the futures market to prevent its collapse.
In 1991, the Exchange Fund was used to provide liquidity support to a few banks that were experiencing runs.
In August 1998, the Government used the Exchange Fund to counter an attack on Hong Kong currency and stock markets by some international financial market predators.
In the wake of the global financial crisis in October 2008, the Exchange Fund provided a full guarantee for all deposits in Hong Kong as well as liquidity and capital support to banks to maintain market and public confidence in Hong Kong’s financial systems.
Taking into full account of the Exchange Fund’s statutory purposes, the Financial Secretary, on advice of the Exchange Fund Advisory Committee (EFAC), has set the following investment objectives for the Exchange Fund: