Hong Kong Monetary Authority
The Hong Kong Monetary Authority (HKMA) was established in April 1993 by merging the Office of the Exchange Fund with the Office of the Commissioner of Banking. The HKMA is responsible for maintaining monetary and banking stability, including maintaining currency stability within the framework of the Linked Exchange Rate system under which the Hong Kong dollar is pegged to the US dollar.
Amendment to law details HKMA's powers of control
THE Hong Kong Monetary Authority's (HKMA) power to take control of a troubled financial institution has been detailed in the Banking (Amendment) Bill 1995.
The bill seeks to clarify the scope, objectives, duties and powers of a manager appointed under the ordinance to take control of an authorised institution, and to effect a number of other operational changes.
The main objectives of the powers of control were to allow the HKMA, the territory's central bank, to control the affairs, business and property of a troubled institution through a manager so that it can be nursed back to health.
The nursing period serves as a prelude to sale and to enable the HKMA to take quick action to safeguard the assets and maintain the fabric of the business until a liquidator can be appointed.
It was proposed that when the HKMA gave a direction to appoint a manager to take control of an authorised institution, it should specify in the direction and the objectives with which the manager was required to comply.
This was to clarify the broad purpose of the manager's appointment, for example, safeguarding the interest of the depositors.
'Subject to the objectives specified by the HKMA in its direction, it was proposed that the manager should be given the necessary powers to do all such things as may be necessary to manage the affairs, business and property of the institution,' a Government spokesman said.
The power of the HKMA to run a problem-ridden bank was a subject of concern when the amendment was initially proposed in the banking community.
Bankers worried that such power may be subject to abuse.
However, the requirement for detailed specification on the purpose of the take-over was seen as a safeguard against abuse.
Also included in the bill is a change, making the HKMA the licensing authority for all types of authorised institutions in the territory, as stated in the amendment to the banking ordinance.
'Under the structure, the HKMA would be responsible for administering authorisation matters,' he said.