Hong Kong Banking Sector Performed Well Last Year

by Mary Swire, for LawAndTax-News.com, Hong Kong

25 April 2006

Hong Kong's banking sector performed strongly last year, with retail banks' aggregate pre-tax operating profits surging 8.2% on 2004. But continued competition and cost pressure will likely make the operating environment challenging this year, according to Monetary Authority Chief Executive Joseph Yam.

In the Authority's 2005 annual report, published on Friday, Mr Yam explained that the exchange and money markets were largely stable during the year, despite massive fund flows arising from speculation about revaluation of the renminbi and initial public offerings in the stock market.

Mr Yam went on to add that discussions with the Mainland authorities are ongoing regarding further expansion of the renminbi business, including the settlement of trade transactions in Hong Kong in renminbi and the issuance of renminbi-denominated bonds.

Under Phase III of the Closer Economic Partnership Arrangement, the Mainland authorities agreed to relax requirements regarding the level of operating funds for Hong Kong banks to open branches on the Mainland to offer renminbi and foreign-currency business to local customers.

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