HONG KONG MONETARY AUTHORITY Annual Report 1996
HONG KONG MONETARY AUTHORITY
The Ordinance also allows non-bank service providers to be authorised as a deposit-taking company whose principal business is to issue or facilitate the issue of multi-purpose cards. This is to allow service provider to take advantage of the smart card technology to improve the efficiency of their services to customers. To enable the Monetary Authority to exempt certain very limited-purpose cards from the approval requirements, the Ordinance provides that the Monetary Authority may declare by notice in the Gazette that certain stored value cards do not fall within the definition of a "multi-purpose card".
Table 3:
FINANCIAL DISCLOSURE PACKAGE 1996:
MAJOR RECOMMENDATIONS
| Cash flow statements | The format of disclosure should follow the recommendations set out in the Hong Kong Statement of Standard Accounting Practice 15 issued by the Hong Kong Society of Accountants. |
| Market risk exposure | Disclosure should follow the market risk disclosure framework proposed by the Basle Committee in 1996 and the enhanced disclosures in other major financial centres. |
| Business nature | Both qualitative and quantitative information which reflect the business nature of authorised institutions is required to be disclosed. |
Money brokers
An orderly and efficient interbank foreign exchange and money
market is important to Hong Kong as an international financial
centre. Another major objective of the Ordinance is to introduce an
authorisation regime for money brokers, which basically provides
that only persons who satisfy the fit and proper criteria set out
in a Schedule to the Ordinance will be approved as money brokers.
Among other things, approved money brokers will be required to
comply with relevant codes and guidelines on conduct of
business.
FINANCIAL DISCLOSURE
Further steps were taken by the HKMA in 1996 to increase the transparency of the financial position of authorised institutions and hence to enable the market to exercise greater discipline over the operations of these institutions. The 1996 package (Table 3) recommended by the Working Party on Financial Disclosure brought financial reporting by banks in Hong Kong in line with major international financial centres. Hong Kong now leads the way in Asia in terms of standards of disclosure.
MARKET RISKS
The continuing growth of international derivative markets and their impact on banks pose important challenges to supervisors. The Barings failure and other financial losses highlight the importance of initiatives already under way to strengthen the supervisory framework relating to derivatives and other trading activities. The initiatives taken include the review of internal controls of institutions both by auditors of the institutions concerned and the HKMA's own examination teams as well as the issue of the guidelines on risk management for derivatives. While the HKMA continues to take a proactive approach to enhance authorised institutions' risk management systems, in particular those on derivatives, it also seeks to ensure that there is adequate capital in the institutions to absorb risks arising from derivatives and other trading operations.