This month, the Legislative Council panel on financial affairs discussed the governance of the Hong Kong Monetary Authority. At the meeting were the HKMA chief, Joseph Yam Chi-kwong, and Financial Secretary Henry Tang Ying-yen, to whom Mr Yam reports.
Public concern about the accountability of the authority and the transparency of its operations was raised in 2001 when the Tung administration decided to use almost $3.7 billion from the Exchange Fund to acquire for the HKMA a 340,000 sq ft office, which was much larger than required.
Some Legco members, including myself, questioned the legality and appropriateness of using the Exchange Fund for this purpose. The HKMA justified it by interpreting the expenditure as 'staff costs', which was permitted under the Exchange Fund Ordinance. Finally, Chief Executive Tung Chee-hwa put an end to the row by personally approving the transaction.
Since then, the financial affairs panel has held a number of meetings to discuss the governance of the monetary authority, including its structure and whether its jurisdiction should be spelled out in the legislation, whether its annual budget should be vetted by Legco - like that of other government departments - and why senior staff should enjoy much higher salary packages than civil servants.
Although the HKMA is a government department, it has argued that resource independence is necessary because Legco control could become a tool for influencing its operations. To shield it from political interference, a special arrangement has been devised. The authority's annual budget and pay review are endorsed by the government-appointed Exchange Fund Advisory Committee and approved by the financial secretary. The money comes from the Exchange Fund and not from general revenue, therefore it does not have to be approved by Legco. The HKMA said the arrangements have, over the past decade, been effective in allowing sufficient flexibility in deploying resources and providing checks and controls, while ensuring that its operations are free from short-term political influence. Unfortunately, they failed to prevent the much-criticised purchase of the new premises.
During the panel meeting on February 2, I urged the monetary authority to improve its accountability and transparency by following the example of the Securities and Futures Commission, which submits its annual budget to the panel for discussion.