HKMA Chief Urges Hong Kong To Maintain Regulatory Standards

by Mary Swire, Tax-News.com, Hong Kong

18 April 2006

Monetary Authority Chief Executive Joseph Yam has warned that Hong Kong cannot afford to let its accounting and regulatory standards slip below internationally accepted practices if the city is to prosper as a major financial centre.

In his latest 'Viewpoint' column published on the authority's website, Mr Yam said there have been a lot of new standards affecting the financial sector and he has explored many ways to make implementation of new standards easier and more cost-effective.

Examples include the new capital adequacy standards ("Basel II"), new anti-money laundering requirements, and new accounting standards.

"Dealing with the introduction of so many standards concurrently has admittedly placed quite a burden on the industry. Theoretically we could choose not to implement certain new standards, or at least spread their implementation over a longer period," Mr Yam observed.

"However, this might be damaging to Hong Kong's position as an international financial centre," he warned.

Hong Kong should not opt out of implementing the new international standards, he said. To make implementation easier and more cost-effective, the authority has put a lot of effort into consultation.

"We have been listening to what the industry has to say about the timetable they want, the approaches they want, and the guidance they need from us," Mr Yam said.

He continued:

"Secondly, we have been very flexible in many aspects of the implementation: we have allowed an extended transition period for those planning to use the more advanced approaches; and have devised a simplified approach for the smaller institutions that do not wish, or do not need, to adopt the advanced approaches.

"Thirdly, we have been trying to harmonise our requirements with those of other regulators to make sure that banks operating in multiple jurisdictions will not have to face inconsistent regulatory requirements.

"We believe this approach will help smooth the implementation of Basel II in Hong Kong. I am sure the banking industry would agree that it is important for Hong Kong to be in the initial wave of jurisdictions implementing Basel II, alongside other major international financial centres such as London, Paris, Frankfurt and Tokyo."

A practical and pragmatic approach should be used, with appropriate consideration given to jurisdiction-specific factors, he said, adding it is important to make the new standards consistent with the requirements of other regulators.

He added that analysis should be done to ensure that the implementation of new standards is cost-effective and the additional administrative burden on institutions arising from adopting the new requirements should be carefully taken into account.

"We will be applying these general principles when considering any new regulatory initiatives in Hong Kong, in order to achieve a balance between costs and benefits. I hope these principles are also applied internationally by all standard-setters and regulators."

Recommended