The Hong Kong Monetary Authority (HKMA) is defending its two-pronged approach to banking regulation that allows it to exercise oversight over supervision and risk management, the Hong Kong Economic Journal reported Tuesday.
In a blog post, chief executive Norman Chan said competition among lenders should focus on service quality and reliability, not on a business model that maximizes profit but barely meets the minimum capital requirements.
Certain banking sources have voiced concern over an erosion of competitiveness given a capital requirement above the international benchmark, the report said.
Chan said lenders’ prudential strategy can inspire confidence in depositors, which is why the HKMA has put in place standards that are more stringent than those in Europe and the United States.
Hong Kong’s banking system is worth about eight times its gross domestic product, with a combined asset value of about HK$17.7 trillion (US$2.28 trillion) as of the end of May.
Chan also pushed back at criticism of its tougher investor protection program in the wake of a fiasco involving Lehman Brothers mini-bonds.
He said lenders have a unique relationship with clients not found in financial institutions that are not engaged in banking services.
Chan’s comments followed complaints by some quarters that the financial market is overly regulated in certain sectors, resulting in unfair competition.
– Contact us at [email protected]