HONG KONG MONETARY AUTHORITY Annual Report 1996
HONG KONG MONETARY AUTHORITY
After a lapse of six months, the HKMA conducted a follow-up examination and was satisfied that all remedial actions had been implemented.
ASSET QUALITY
One of the HKMA's main supervisory priorities in 1996 was to intensify its monitoring of authorised institutions' asset quality. This was in the expectation that asset quality would deteriorate during the year - which turned out to be the case, although serious problems did not emerge. Apart from continued on-site examinations of loan books and lending system, the main effort was placed on improving off-site analysis of the way in which individual institutions had classified and provided against problem credits. Peer group comparisons were made easier by the reporting of the "top ten" exposures within each category of classified loans (i.e. substandard, doubtful and loss). During the year the HKMA also obtained more information about the quality of credit card loans, including the monthly rate of charge-offs on these. This did not reveal any deterioration in quality during the course of the year.
RELATIONSHIP WITH OTHER SUPERVISORS
Following the signing of a Memorandum of Understanding (MOU) with the Securities and Futures Commission (SFC) in October 1995, the HKMA and SFC met regularly once every two months to discuss issues and cases of mutual interest. In 1996, the HKMA, with the assistance of the SFC, also developed an on-site examination guide on the securities activities of authorised institutions.
The HKMA continued to maintain close dialogue with a large number of overseas supervisory authorities in 1996 on supervisory matters. In line with the recommendations of the Basle Committee on Banking Supervision, the HKMA is discussing with a number of overseas supervisory authorities the signing of MOUs to enhance exchange of supervisory information and co-operation. An MOU with the Autoridade Monetaria E Cambial De Macau (Monetary and Exchange Authority of Macau) was signed in February 1997.
CONTINGENCY PLANNING
Following a serious fire which destroyed a commercial building in Kowloon and the breakdown of the computer system of a local bank, the HKMA has looked into the contingency plans of banks with a retail branch network. This exercise revealed that the contingency plans of many banks were far from satisfactory. These banks have been requested to enhance their plans to ensure that customer services can be restored within a reasonable period of time in the event of a major fire or breakdown of their computer and payment systems.