Local and foreign business chambers in Hong Kong issued statements recently calling on the government to take concrete action to defuse the ongoing political crisis. The suggestions included official withdrawal of the extradition bill and establishing an independent inquiry into the events that rocked the city over the past two months.
As the business sector, which has remained relatively conservative and rarely taken a stand on political issues in the past, has joined the calls for conciliatory gestures, it is an indication of the magnitude of the problem that Hong Kong is facing right now.
Given the situation, it has become important for the regulatory authorities to uphold their duties and maintain the stability of the financial system.
Amid the turbulence, the government has announced that Eddie Yue Wai-man, the incumbent deputy chief executive of the Hong Kong Monetary Authority (HKMA), will succeed Norman Chan Tak-lam as the next chief of the institution.
Yue’s appointment as the new chief executive of the HKMA will take effect on October 1.
As we all know, the HKMA is mainly charged with regulating the city’s banking system.
Under the current Banking Ordinance, the HKMA is also the licensing authority that is responsible for authorization, suspension or revocation of all three types of authorized institutions.
The de factor central bank is responsible for facilitating the security and stability of the banking system through the principle of prudent regulation.
At the same time, the HKMA is also serving as a frontline regulator responsible for overseeing the securities trading services provided by banks operating locally in the city.
In particular, it is the HKMA’s duty to make sure that banks are enforcing sufficient internal controls in order to meet the requirements under the related code of market conduct and practice when it comes to selling securities investment products to clients.
The HKMA must also, under the Exchange Fund Ordinance and the authority given by the financial secretary, manage the city’s Exchange Fund in accordance with the investment objective approved by the Exchange Fund Advisory Committee.
In the past, when Hong Kong was hit by financial crises, the government had, on several occasions, deployed the Exchange Fund to stabilize the local financial market and guarantee the cash flow of the banking sector in order to maintain market confidence in the financial system.
As we can see, the HKMA is basically in charge of Hong Kong’s economic arteries, and can compare with central banks in other jurisdictions around the world.
At present, there are a lot of uncertainties in the external economic environment, amid issues such as the Sino-US trade war and Brexit. All these factors may affect the stability of Hong Kong’s financial market.
As such, in order to be qualified to head the HKMA in time of difficulties, a candidate must have the necessary experience as well as competence.
Yue has been working with the HKMA for 26 years, and has been in charge of different departments within the institution over the years, including monetary management, external affairs, economic research and market development.
Given his experience, I believe Yue would be up to the job of leading the HKMA in the days ahead.
As far as the outgoing chief executive Chan is concerned, one can say that Hong Kong’s banking system has remained healthy and stable during his term in office.
Moreover, Chan has made concerted efforts at developing fintech and green finance by devising quite a number of new measures, not to mention his willingness to communicate with people of different political opinions.
It is my sincere hope that the incoming boss of HKMA will continue to strike a reasonable balance between regulation and innovation, while also maintaining the open-minded approach of his predecessor in communication and cooperation with different sectors in society.
This article appeared in the Hong Kong Economic Journal on July 31
Translation by Alan Lee
[Chinese version 中文版]
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