Headquarters | International Finance Centre, Central, Hong Kong |
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Established | 1 April 1993 |
Chief Executive | Eddie Yue |
Central bank of | Hong Kong |
Currency | Hong Kong dollar HKD (ISO 4217) |
Bank rate | 2.75% (as of 28 July 2022 [update] ) [1] |
Interest on reserves | None |
Website | www |
Hong Kong Monetary Authority | |||||||||||||||||||||||
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Chinese | 香港 金融 管理 局 | ||||||||||||||||||||||
Cantonese Yale | Hēunggóng gāmyùng gúnléihgúk | ||||||||||||||||||||||
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Alternative Chinese name | |||||||||||||||||||||||
Chinese | 金 管 局 | ||||||||||||||||||||||
Cantonese Yale | Gām gún gúk | ||||||||||||||||||||||
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The Hong Kong Monetary Authority (HKMA) is Hong Kong's central banking institution. It is a government authority founded on 1 April 1993 when the Office of the Exchange Fund and the Office of the Commissioner of Banking merged. The organisation reports directly to the Financial Secretary. [2]
The exchange fund was established and managed originally by the Currency Ordinance in 1935,now named the Exchange Fund Ordinance. Under the Ordinance,the HKMA's primary objective is to ensure the stability of the Hong Kong currency,and the banking system. It is also responsible for promoting the efficiency,integrity and development of the financial system. [3]
The HKMA issues banknotes only in the denomination of ten Hong Kong dollars. The role of issuing other banknotes is delegated to the note-issuing banks in the territory,namely The Hongkong and Shanghai Banking Corporation,Standard Chartered Bank and Bank of China.
The official reserves of Hong Kong and the banking system are important underpinnings of the linked exchange rate system.
Since 1995,the HKMA has entered into a stability pact with central banks in Malaysia,Thailand,Indonesia and Australia to engage in repurchase agreements,which provide liquidity on a two-way basis. [4]
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The Central Moneymarkets Unit (CMU), established in the 1990, provides computerised clearing and settlement facilities for Exchange Fund Bills and Notes. It extended the service to other Hong Kong dollar debt securities in late 1993. A seamless interface allow the co-existence of the CMU and the newly launched real-time gross settlement (RTGS) inter-bank payment system. This enables end-of-day delivery versus payment (DVP) services as opposed to Non-DVP.
In 2018, HKMA developed the infrastructure for the Faster Payment System and launched it in September of that year.
Banking stability mainly depends on the banking system and supervision. A three-tier banking system (銀行三級發牌制度) was implemented in the 1980s. Institutions are also managed differently depending on whether they are categorised as licensed banks, restricted license banks or deposit-taking institutions. Overseas banks may also establish local representative offices in Hong Kong.
In 2019, the HKMA began issuing the first batch of virtual bank licenses in Hong Kong; these banks were not required to have physical branches in the city.
It is included the Linked Exchange Rate System and noticeable features such as the Aggregate Balance, Certificates of Indebtedness and coins issued and the Outstanding Exchange Fund Bills and Notes.
The Interest Rate Adjustment Mechanism is an automatic system that maintains the stability of the Hong Kong dollar exchange rate. Lately the HKMA has been disclosing the forecast change in the Aggregate Balance attributes to increase the transparency of the Currency Board operation.
In 1995, Nobel Prize–winning economist Milton Friedman mistakenly predicted the Hong Kong dollar's demise within two years of the 1997 handover. He also predicted the absorption of the territory's financial reserves of US$43 billion (HK$335.4 billion) by Beijing, which would not be able to bear the subrogation of Hong Kong's monetary policy to the United States. [5]
As with any monetary system not based on a fiat money (which includes currency boards, currency unions and the traditional gold standard) it is impossible to use monetary policy to stabilise the business cycle: this means that any macroeconomic adjustment has to be achieved by changes in the prices of assets and labour. In Hong Kong, this is made easier by two factors: the first is the openness of the economy, with an aggregate demand heavily dependent on international trading partners; this reduces the risk of classic liquidity traps. The second factor is the scarce political clout of the trade unions, which makes it easier to trim the nominal salaries during recessionary times. [6] Moreover, the high saving rates and the moral stigma attached to bankruptcy have kept relatively low the level of defaults on mortgages even during the deep recessions after the 1997 Asian financial crisis and the SARS epidemic in 2002/2003.
For more information, please look at Exchange Fund (Hong Kong) page.
Under colonial rule, the HKMA did not place funds with local banks not rated by Moody's Investors Service or Standard & Poor's. Only the three note issuing banks could receive deposits because they had been rated by "objective international standards". [7]
During the 1997 Asian financial crisis, currency speculators sold the Hong Kong dollar heavily and shorted local stocks and Hang Seng Index futures. The government controversially used the exchange fund to acquire HK$120 billion (US$15 billion) worth of blue-chip shares in a two-week market intervention, beginning 12 August 1998 with the aim of punishing and deterring currency speculators. [8] The intervention was widely criticised as being detrimental to the reputation as one of the world's financial centres. Instead of being a regulator, the government has become "a player, a very key player". [9]
In hindsight, one speculator said, "Government intervention raised public confidence in the market when it was near total collapse. It prevented a bigger crisis and saved the market." [10]
Most stocks acquired during that operation were successively disposed with the creation of a tracker fund, the TraHK. That reduced the portfolio of HK equities to 5.3% of the reserves in 2003. However, the percentage crept back and had risen above 10% by the year 2006.
In August 1998, as part of its wider remit to protect the currency, the authority lent the Thai government US$1 billion from the fund as part of a $17 billion bailout organised by the International Monetary Fund (IMF). [3]
The HKMA's is headquartered in the International Finance Centre. It purchased fourteen floors in Tower 2. [11] The 55th, 56th and the 77th to 88th floors were bought for US$480 million in 2001. [12] An exhibition area, currently containing an exhibit of Hong Kong's monetary history, and a library of the Hong Kong Monetary Authority Information Centre occupy the 55th floor. [13] The 88th floor of the tower contains the office of the chief executive of the HKMA, and is served by an individual lift.
The Chief Executive is appointed for a five-year term by the Financial Secretary, and is continuously renewable with no term limit.
No. | Name (birth–death) | Term of office | Higher education | Previous role | Financial Secretaries Served | ||
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Start of term | End of term | Duration | |||||
1 | Joseph Yam Chi-kwong, GBM, GBS, JP 任志剛 (1948–) | 1 April 1993 | 30 September 2009 | 16 years and 183 days | University of Hong Kong (BSocSc) | Director of the Office of the Exchange Fund | Sir Hamish Macleod Donald Tsang Antony Leung Henry Tang John Tsang |
2 | Norman Chan Tak-lam, GBS, JP 陳德霖 (1954–) | 1 October 2009 | 30 September 2019 | 10 years and 0 days | Chinese University of Hong Kong (B.S.) | Director of the Office of the Hong Kong Chief Executive | John Tsang Paul Chan |
3 | Eddie Yue Wai-man, JP 余偉文 (1965–) | 1 October 2019 | Incumbent | 4 years and 51 days | Chinese University of Hong Kong (B.B.A.) University of London (LL.B, M.S.) Harvard University (M.B.A.) | Deputy Chief Executive of the Hong Kong Monetary Authority | Paul Chan |
The chief executive is supported by a number of deputy chief executives, shown below in order of appointment.
The Hong Kong Monetary Authority hosted the meeting of the World Bank and IMF in 1997, at an estimated cost of HK$485 million. Yam hoped that hosting the event would cement Hong Kong's status as an international financial centre. He added: "The presence of the world's leading finance ministers, central bank governors and top commercial bankers in Hong Kong so soon after the change of sovereignty will help boost international and local confidence in Hong Kong". [14]
The HKMA is also host to the 2022 Global Financial Leaders' Investment Summit.
The economy of Hong Kong is a highly developed free-market economy. It is characterised by low taxation, almost free port trade and a well-established international financial market. Its currency, called the Hong Kong dollar, is legally issued by three major international commercial banks, and is pegged to the US dollar. Interest rates are determined by the individual banks in Hong Kong to ensure that they are market driven. There is no officially recognised central banking system, although the Hong Kong Monetary Authority functions as a financial regulatory authority.
Special drawing rights are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). SDRs are units of account for the IMF, and not a currency per se. They represent a claim to currency held by IMF member countries for which they may be exchanged. SDRs were created in 1969 to supplement a shortfall of preferred foreign exchange reserve assets, namely gold and U.S. dollars. The ISO 4217 currency code for special drawing rights is XDR and the numeric code is 960.
The renminbi is the official currency of the People's Republic of China. It is the world's 5th most traded currency as of April 2022.
In macroeconomics, the money supply refers to the total volume of money held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circulation and demand deposits. Money supply data is recorded and published, usually by the national statistical agency or the central bank of the country. Empirical money supply measures are usually named M1, M2, M3, etc., according to how wide a definition of money they embrace. The precise definitions vary from country to country, in part depending on national financial institutional traditions.
A reserve currency is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves. The reserve currency can be used in international transactions, international investments and all aspects of the global economy. It is often considered a hard currency or safe-haven currency.
The International Finance Centre is a skyscraper and integrated commercial development on the waterfront of Hong Kong's Central District.
The 1997 Asian financial crisis was a period of financial crisis that gripped much of East and Southeast Asia during the late 1990s. The crisis began in Thailand in July 1997 before spreading to several other countries with a ripple effect, raising fears of a worldwide economic meltdown due to financial contagion. However, the recovery in 1998–1999 was rapid, and worries of a meltdown quickly subsided.
The Hong Kong dollar is the official currency of the Hong Kong Special Administrative Region. It is subdivided into 100 cents or 1000 mils. The Hong Kong Monetary Authority is the monetary authority of Hong Kong and the Hong Kong dollar.
The Macanese pataca or Macau pataca is the currency of the Macao Special Administrative Region of the People's Republic of China. It is subdivided into 100 avos, with 10 avos called ho (毫) in Cantonese.
Joseph Yam Chi-kwong, GBM, GBS, CBE, JP is a Hong Kong statistician, economist and civil servant. He was the first Chief Executive of the Hong Kong Monetary Authority, Hong Kong's de facto central bank, holding the position for 16 years. In 2011 Yam was elected to a member of the board of directors of the Swiss Bank UBS AG. In 2014, following UBS AG's restructuring, he was appointed to the board of directors of the UBS Group AG and served in the position till May 2017. He has been a member of the Corporate Culture and Responsibility Committee and the Risk Committee of the UBS Group AG since 2011 and a non-official member of the Executive Council of Hong Kong since 2017.
Foreign exchange reserves are cash and other reserve assets such as gold held by a central bank or other monetary authority that are primarily available to balance payments of the country, influence the foreign exchange rate of its currency, and to maintain confidence in financial markets. Reserves are held in one or more reserve currencies, nowadays mostly the United States dollar and to a lesser extent the euro.
Bank of China (Hong Kong) Limited (Chinese: 中國銀行(香港)有限公司), also known as its short name Bank of China (Hong Kong) or BOCHK (Chinese: 中銀香港), is a subsidiary of the Bank of China (via the Hong Kong-listed intermediate holding company BOC Hong Kong (Holdings)). Bank of China (Hong Kong) is the second-largest commercial banking group in Hong Kong in terms of assets and customer deposits (2008 data), with more than 190 branches across Hong Kong as of the end of 2019. It is also one of the three commercial banks licensed by the Hong Kong Monetary Authority to issue banknotes for the Hong Kong dollar.
The Bangko Sentral ng Pilipinas is the central bank of the Philippines. It was established on July 3, 1993, pursuant to the provision of Republic Act 7653 or the New Central Bank Act of 1993 as amended by Republic Act 11211 or the New Central Bank Act of 2019. The principal author was Senator Franklin Drilon. It was signed by President Rodrigo Duterte.
The issue of banknotes of the Hong Kong dollar is governed in the Special Administrative Region of Hong Kong by the Hong Kong Monetary Authority (HKMA), the governmental currency board of Hong Kong. Under licence from the HKMA, three commercial banks issue their own banknotes for general circulation in the region. Notes are also issued by the HKMA itself.
A linked exchange rate system is a type of exchange rate regime that pegs the exchange rate of one currency to another. It is the exchange rate system implemented in Hong Kong to stabilise the exchange rate between the Hong Kong dollar (HKD) and the United States dollar (USD). The Macao pataca (MOP) is similarly linked to the Hong Kong dollar.
The Clearing House Automated Transfer System, or CHATS, is a real-time gross settlement (RTGS) system for the transfer of funds in Hong Kong. It is operated by Hong Kong Interbank Clearing Limited, a private company jointly owned by the Hong Kong Monetary Authority (HKMA) and the Hong Kong Association of Banks. Transactions in four currency denominations may be settled using CHATS: Hong Kong dollar, renminbi, euro, and US dollar. In 2005, the value of Hong Kong dollar CHATS transactions averaged HK$467 billion per day, which amounted to a third of Hong Kong's annual Gross Domestic Product (GDP); the total value of transactions that year was 84 times the GDP of Hong Kong.
Norman Chan Tak-lam, GBS, JP, is a Hong Kong banker, treasury official, and civil servant. Chan was Chief Executive of the Hong Kong Monetary Authority from 2009 to 2019. He previously served as Director of the Office of the Chief Executive of the HKSAR and Regional Vice-Chairman of Standard Chartered Bank.
Since the late-2000s, the People's Republic of China (PRC) has sought to internationalize its official currency, the Renminbi (RMB). RMB internationalization accelerated in 2009 when China established the dim sum bond market and expanded Cross-Border Trade RMB Settlement Pilot Project, which helps establish pools of offshore RMB liquidity. The RMB was the 8th-most-traded currency in the world in 2013 and the 7th-most-traded in early 2014. By the end of 2014, RMB ranked 5th as the most traded currency, according to SWIFT's report, at 2.2% of SWIFT payment behind JPY (2.7%), GBP (7.9%), EUR (28.3%) and USD (44.6%). In February 2015, RMB became the second most used currency for trade and services, and reached the ninth position in forex trading. The RMB Qualified Foreign Institutional Investor (RQFII) quotas were also extended to five other countries — the UK, Singapore, France, Korea, Germany, and Canada, each with the quotas of ¥80 billion except Canada and Singapore (¥50bn). Previously, only Hong Kong was allowed, with a ¥270 billion quota.
The Exchange Fund of Hong Kong is the primary investment arm and de facto sovereign wealth fund of the Hong Kong Monetary Authority. First established in 1935 in order to provide backing to the issuance of Hong Kong dollar banknotes, over the years the role of the Fund has continually expanded to now include management of fiscal reserves, foreign currency reserves, real estate investments, and private equity.