HONG KONG MONETARY AUTHORITY Annual Report 1996
HONG KONG MONETARY AUTHORITY
The section dealing with the use of referees and the chapter on debt collection were issued in August 1996 in advance of the full Code in view of the public concerns regarding these two issues. The full draft Code was completed at end of 1996 and was issued to industry associations and interested parties in January 1997 for consultation. The Code is expected to be finalised and issued in the first half of 1997.
CHALLENGES
MARKET RISKS
With the globalisation of financial markets, banks will be increasingly exposed to new risks around the world. The continuing growth of international derivatives markets and their impact on banks are among some of the important challenges faced by supervisors.
The HKMA is in the process of drafting a market risk policy paper introducing the new capital requirement for local institutions. It is also considering the necessary amendments to the Third Schedule to the Banking Ordinance so as to give the revised regime statutory effect by the end of 1997.
The HKMA is currently preparing the model review programme for the assessment of the systems of the prospective model users. It is also in the process of visiting some of these institutions to understand the systems that the institutions have in operation. The HKMA will implement a formal model recognition process during 1997. In this process the HKMA will seek to ascertain that both the qualitative and quantitative criteria for the models approach as proposed by the Basle Committee are met before formally recognising the models of an institution for this purpose. It will also take into account the current practices of other banking supervisors as well as industry-wide developments in this area.
SUPERVISORY CO-OPERATION
The fact that banks are now exposed to new types of risk around the world has increased the need for supervisors to co-operate with one another, both geographically and functionally. The HKMA will continue to participate in this process by extending its bilateral co-operation with banking supervisors in other countries. Where appropriate, efforts will be made to formalise such co-operation, for example by participating in information sharing agreements. The HKMA is also playing an increasingly active role in international and regional forums of banking supervision. It currently chairs the EMEAP Study Group on Banking Supervision and was one of the participants in a working group formed by the Basle Committee on Banking Supervision to draft a set of Core Principles for Effective Banking Supervision.