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Hong Kong Banking System. Group 2. Group Member List. Lee Tsz Ho, Kenneth 053174 Ip Wing Chi, Joyce 053161 Chan Shing Yip, Thomas 053230 Leung Yuen Yan, Kathy 053183 Li Piu Nam, Bill 053162. What is the Central Bank in Hong Kong?. The answer is Hong Kong Monetary Authority. Content.

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group member list
Group Member List

Lee Tsz Ho, Kenneth 053174

Ip Wing Chi, Joyce 053161

Chan Shing Yip, Thomas 053230

Leung Yuen Yan, Kathy 053183

Li Piu Nam, Bill 053162

content
Content
  • Introduction of Hong Kong Monetary Authority (HKMA)
  • Comparison

~ HKMA vs. European Central Bank

~ HKMA vs. Bank of Japan

~ HKMA vs. Bank of England

  • Conclusion
introduction to hkma
Introduction to HKMA
  • established on 1 April 1993
  • by merging the Office of the Exchange Fund with the Office of the Commissioner of Banking
main functions of hkma
Main functions of HKMA
  • keeping the Hong Kong dollar stable
  • managing the Exchange Fund
  • promoting the safety of Hong Kong's banking system
  • developing Hong Kong's financial infrastructure

to enable money to flow smoothly, freely and without obstruction

the hkma s policy objectives
The HKMA's policy objectives
  • to maintain currency stability
  • to promote the safety and stability of the banking system
  • to enhance the efficiency, integrity and development of the financial system
supervision of liquidity
Supervision of liquidity
  • Basle Committee on Banking Supervision
  • maintain adequate liquidity and capital adequacy ratios
  • Minimum monthly average liquidity ratio of 25%.
banknotes
Banknotes
  • issued by the three note-issuing banks
    • BOC, HSBC, Standard Chartered
  • required to submit US dollars (at HK$7.80=US$1) to the HKMA

Hong Kong dollar banknotes are fully backed by US dollars held by the Exchange Fund

coins and ten dollars banknotes
Coins and Ten dollars banknotes
  • issued by the Government through the HKMA
  • settled against US dollars at the rate of HK$7.80 to one US dollar

 fully backed by US dollars

comparison

Comparison

HKMA and the Central Bank in Different Countries

comparison14
Comparison
  • They are …

~ European Central Bank (ECB)

~ Bank of Japan (BOJ)

~ Bank of England (BOE)

comparison15

Comparison

HKMA and ECB

comparison between hkma and ecb
Comparison between HKMA and ECB
  • Similarity

~ Aim : to maintain the price stability

~ Supervision of liquidity (監察流動資金

充足程度)

comparison between hkma and ecb17
Comparison between HKMA and ECB
  • Difference

~Copyright of banknotes and coins

comparison20

Comparison

HKMA and BOJ

background of bank of japan
Background of Bank Of Japan
  • Central bank of Japan
  • Juridical person established based on the Bank of Japan Law
  • Not a private corporation
  • Consists of 3 parts:
    • The Policy Board
    • Bank Executives
    • Departments, Branches, Local Offices in Japan, and Overseas Representative Offices
decision making
Decision making
  • Basic stance for monetary policy is decided by the Policy Board at Monetary Policy Meetings (MPM)
  • the Policy Board:
    • Discusses economic and financial situation
    • decides the guideline for money market operations
    • announces decisions immediately after the meeting
open market operation
Open Market Operation
  • Monetary policy that involves the buy and sell of securities
  • influences the volume of money:
    • By buying and selling Japanese Government securities (JCG) mainly.
objectives
Objectives
  • Main aim:
    • maintain the price stability as it provides the foundation for the nation's economic activity.
    • The Bank of Japan Law states that the objectives should be "aimed at, through the pursuit of price stability, contributing to the sound development of the national economy."
slide26
Duty
  • monitor commercial banks and supervised their activity to provide a good business environment
currency issued
Currency issued
  • Issuing all of its region’s currency including
    • 10,000yen, 5,000yen, 2,000yen, 1,000yen bank notes
    • 500yen Nickel-brass, 100yen Cupro-nickel, 50yen Cupro-nickel, 10yen Bronze, 5yen Brass and 1yen Aluminum Coin
    • Japanese Government Securities
slide28
Role
  • acts as the government bank:
    • such as treasury funds and Japanese government securities (JGS) services. The Bank accepts deposits (treasury funds) from the government as government deposits
clearing
Clearing
  • three clearing systems:
    • the Zengin Data Telecommunication System(retail credit transfers)
    • the Foreign Exchange Yen Clearing System (FXYCS)(mainly yen legs of foreign exchange transactions)
    • bill and cheque clearing systems (BCCSs)(bills and cheques collected at regional clearing houses)
comparison30

Comparison

Bank of England and HKMA

bank of england
Bank of England
  • Central Bank of : United Kingdom
  • Established in : 1694
  • Headquarters : London
  • Current Inflation : 3.1%(next due : 15thMay,07)
  • Inflation Target : 2.0%

Bank of England

Resource: http://en.wikipedia.org/wiki/Bank_of_england

comparison similarity
Same main objectiveComparison -- Similarity
  • HKMA :
  • the HKMA is the government authority in Hong Kong responsible for maintaining monetary and banking stability
  • Bank of England :
  • the bank is committed to promoting and maintaining monetary and financial stability as its contribution to a healthy economy
comparison similarity33
Bank of England :

debate on issues relating to the international financial architecture

The HKMA :

effectively measure and report on the risks of major functions, products or business activities

Comparison -- Similarity

Cautious general risk management policy

comparison difference
Bank of England :

takes a role as a central bank

considers risks across the system as a whole

The HKMA :

is the government authority in Hong Kong

but not taking the role as the central bank

Comparison -- Difference

Role as central bank

comparison difference35
Bank of England :

has the power to give instructions to the bank on interest rates for a limited period

has to meet the inflation target by setting an interest rate

The HKMA :

no right to set the interest rate and inflation target

is primarily determined by the Fed to suit the US

Comparison -- Difference

Control the interest rate

comparison difference36
Bank of England :

has been issuing banknotes for over 300 years

gaining and maintaining public confidence in the currency is a key role

The HKMA :

does not own the right to issue banknotes

(except $10 banknotes)

but the copyright of coins is handed by HKMA

Comparison -- Difference

Copyright of banknotes

conclusion

Conclusion

Which monetary system works better out of the above comparison?

conclusion38
Conclusion
  • The aims of the four central banks are most likely the same
  • Similar supervision approach on banking system by risk management
  • Main difference is the issue of notes and coins
what hkma wins
What HKMA Wins
  • Enjoy the highest degree of freedom
    • Not controlled by the government
      • An independent authority
    • Will not be easily influenced by the government
    • Report to the public directly
what hkma wins cont d
What HKMA Wins (Cont’d)
  • Promotes free market
    • Let the interest rate flow
    • Rarely interfere the market
our suggestions
Our Suggestions
  • Focus more on the business morals of the banks
  • Prevent discriminations
    • E.g. Serving the rich only
  • Develop a fine supervisory system over the e-banking
  • Prevent counterfeit money
reference cont d
Reference (Cont’d)

Books:

  • T.Y. Choi, Eric F.K. Chiu (1994) Hong Kong Banking System and Practice. The Chartered Institute of Bankers, HK.
  • T.K. Ghose (1995) The Banking System of Hong Kong. Butterworth.
  • Study Group of the Chinese Banks’ Association (1988) Hong Kong’s Banking System in Transition: Problems, Prospects, and Policies. Asian Research Service
  • Chen Jianhua (1998) Hong Kong Finance Development in the Future. Guo Shiping. (P.27-31)
reference
Reference
  • The Hong Kong Monetary Authority Homepage
  • http://www.hkma.com
  • Bank of Europe Homepage
  • http://www.ecb.int/mopo/intro/html/operational.en.html
  • The Bank of England Homepage
  • http://www.bankofengland.co.uk
  • The Bank of Japan
  • http://www.boj.or.jp/
  • Profiles of Hong Kong Major Service Industries (Banking)
  • http://www.toletrade.com/main/si/spbank.htm
  • Economic Forum (3, Feb, 2005, “A to Z of Money and Banking”)
  • http://www.tdctrade.com/econforum/hkma/hkma050201.htm
  • Economic Forum (22, April, 2004, “Sharing Credit Information”)
  • http://www.tdctrade.com/econforum/hkma/hkma040404.htm
reference cont d44
Reference (Cont’d)

Journal, Magazine, Newspaper, and others

  • Speech by the Chief Executive of HKMA (Fri, 20-10-2006)
  • <<One Country, Two financial systems>>
  • Speech by Executive Director (Banking Policy), (7 September 2006) Simon Topping<< Enhancing disclosure by Hong Kong banks>>
  • SCMP by Louis Beckerling (10-5-2006)
  • <<Size matters for lenders wanting to stay on top>>
  • SCMP by Tvonne Liu (23-8-2006)
  • <<Demand soars for Central office space>>
  • SCMP by Louis Beckering (15-12-2005)
  • <<Sweeteners for deposits could turn sour>>
  • Journal of Economic Issues by Forder, James
  • <<Why Is Central Bank Independence So Widely Approved? >>
  • Journal of Post Keynesian Economics by Fontana, Giuseppe
  • <<The Federal Reserve and the European Central Bank: a theoretical comparison of their legislative mandates>>
  • Speech by Andrew Sheng of Deputy Chief Executive Hong Kong Monetary Authority
  • <<Financial Regulation>>