The Hong Kong Monetary Authority has urged banks to set up internal control systems for their Mandatory Provident Fund (MPF) business. 'The HKMA expects . . . institutions and their employees will conduct their MPF-related activities honestly, fairly, in good faith and with integrity,' HKMA deputy chief executive David Carse said in a circular issued yesterday to bank chief executives. To achieve this goal, he said, institutions must set up internal control systems that should include guidelines for selling MPF products. The guidelines should include procedures and controls for handling MPF clients' assets and customers' complaints. Mr Carse also said the authority would hold talks with banks that provide guaranteed-return MPF products and assess the impact on capital adequacy requirements. He said institutions must follow the code of conduct issued by the Mandatory Provident Fund Schemes Authority. Under the code, institutions must ensure only staff who have passed MPF examinations are allowed to sell the pension plans. 'The HKMA will monitor authorised institutions' involvement in the MPF business, particularly their compliance with the code, through on-site examination,' Mr Carse said.