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Hong Kong Monetary Authority

Hong Kong Monetary Authority. Briefing to the Legislative Council Panel on Financial Affairs. 3 January 2000. Y2K. Wellness checks completed Banks operating as usual. Economic Recovery. Real GDP Growth. Strong rebound in Q2 Q3 growth: 4.5%. Forecast. Exchange Rates.

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Hong Kong Monetary Authority

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  1. Hong Kong Monetary Authority Briefing to the Legislative Council Panel on Financial Affairs 3 January 2000

  2. Y2K Wellness checks completed Banks operating as usual

  3. Economic Recovery Real GDP Growth • Strong rebound in Q2 • Q3 growth: 4.5% Forecast

  4. Exchange Rates Effective Exchange Rate Indices • REER back to pre-crisis level • Not a strong impediment to competitiveness Dec 1997 1998 1999

  5. Interest Rates Nominal Interest Rates • Stable since September 1998 • Premium over USD interest rates has narrowed

  6. Interest Rates Real Interest Rates • Long-term rate still high but has come down • Well below headline rate • Not as serious an obstacle to recovery as sometimes is thought (% p.a.) 14 12 Long-term expected real interest rate 10 Headline short-term interest rate 8 10.0 6 4 3.7 2 0 -2 -4 -6 -8 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99

  7. Domestic Credit Bank Lending • Domestic loans showed first rise in 17 months • Should increase further with continuing economic recovery & resolution of GDE issue 1996 1997 1998 1999

  8. Challenges and Opportunities Volatile Capital Flows Technology Globalisation Changing Financial Landscape Banks Small Open Economies • Consolidation for scale • Bigger markets • Strengthen own financial systems

  9. Challenges and Opportunities International Reforms • Risk Management • Transparency • Codeof Good Practices Regional Initiatives • AMU? • Bond Market • Technical Cooperation Domestic Responses • Self-strengthening • resources • market development • regulatory coordination • tighter rules

  10. Challenges and Opportunities WTO Role Principal • Knowledge of China • Proximity: geography, culture, language HK HK HK Intermediary Nature Physical Industries Knowledge-based Industries (entrepot; manufacturing) (financial, telecom, prof. services)

  11. Work Plan 2000 - Monetary 9/1998 9/1998 -8/2000 8/2000 8/2000 onwards Sub-committee on Currency Board Operations 7 Technical Measures Convergence of Convertibility Rates Ongoing review of system • Two-way convertibility • Transferability among Monetary Base components • Scheduled movement of CU rate of Aggregate Balance to 7.80 • Currency options • Electronic money • Dollarisation

  12. Work Plan 2000 - Monetary Possible Topics: • Competitiveness issues • Repercussions of Asian crisis on regional financial markets • Mainland’s financial developments and interface with Hong Kong • Monetary linkages among Asian economies

  13. Work Plan 2000 - Banking Interest Rate Deregulation Monitoring Indicators Monitoring Indicators July 2001 July 2000 • Time deposits < 7 days • Savings account • + • Current account

  14. Work Plan 2000 - Banking Depositor Protection Factors Plan • Increased Competition • Stability of the banking system • International Practice • Cost and moral hazard issues • Consultancy Study in H1 2000 • Public Consultation Deposit Insurance?

  15. Work Plan 2000 - Banking Credit Register Corporates Financing Request Loans Central Credit Register data Banks In-House Study in H1 2000

  16. Work Plan 2000 - Banking Consolidation • Market-based approach • HKMA, as supervisor, will facilitate • No mandated consolidation for healthy banks • Approaches to consolidation : • Alliance • Mergers and Acquisitions

  17. Work Plan 2000 -Infrastructure USD Clearing HKMA Settlement Institution USD Cheques Securities Trading in USD Bulk Clearing HKD RTGS USD RTGS In phases in H2 2000 • Enhance competitiveness as IFC • Enhance settlement efficiency • Enhance monetary stability

  18. Work Plan 2000 - HKMA in Community Accountability Transparency Accessibility • Website, • Bulletins, • Publications • Public • Education • Programme • Regular • Briefings • to LegCo • Exhibitions • at • Districts

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