Hong Kong Monetary Authority chief calls on mainland counterpart to follow international practice The Hong Kong Monetary Authority has urged its mainland counterpart to modify its recently launched bill programme to bring it more closely into line with international practice. HKMA chief executive Joseph Yam Chi-kwong suggested the People's Bank of China (PBOC) conduct more daily money market operations, and not 'overdo' the transparency of the bidding process for its bill programme. The programme, started late last month by the PBOC, replaced its twice-weekly repurchase operations to manage monetary policy. The move was aimed at matching more closely the practices of other central banks by selling short-term bills - of three months or six months maturity - to banks through a regular weekly bidding process. Central banks control the provision of bills to manage monetary supply and change interest rate levels. 'I consider this change to be a significant move towards sophistication in monetary management on the mainland,' Mr Yam said in his weekly column on the HKMA Web site yesterday. He suggested the PBOC modify its bill programme to match international practices. As an example, he said the PBOC at the moment announced only a week ahead the maturity of the bill paper to be issued. 'The market would like as much information on the central bank bill programme as possible in order to plan ahead, in terms, for example, of managing maturity mismatches,' Mr Yam said. 'The thing to do may be to fix the weekly programme and to fine-tune monetary conditions through rather more frequent money market operations of the type carried out daily by other central banks engaging in discretionary monetary management.' Also, he said the PBOC may have 'overdone' the transparency of its bidding process by publishing the names of successful banks and the amount bid. Mr Yam said while such disclosure might do little harm to China's commercial banks, it was different from the practice in most other parts of the world, including Hong Kong. Most central banks announced only the price and subscription amount, not the names of individual bidders. 'In the fullness of time, the People's Bank of China would probably wish to step back from the market and play the rather more leveraged and distant central banking role similar to those of other central banks,' Mr Yam said. However, City University financial professor Stephen Cheung Yan-leung said it was good practice for China to keep a high level of transparency. 'Other central banks do not follow such a practice but it does not mean China should follow them. I think central banks should provide the market with as much information as possible,' Mr Cheung said. Tam Ping-shing, DBS Bank head of treasury and markets, said announcing the name of successful bidders might be aimed at preventing speculation. 'By announcing who holds the bills, the PBOC can help make sure bankers do not use them to speculate in the monetary system,' he said.
