Hong Kong financial companies have made progress in safeguarding against risky behaviour, but further improvements are needed, said HKMA deputy chief executive Arthur Yuen. He said major financial firms for the most part are on the right track, improving governance and explaining risks to customers to ensure consumer protection. However, locally there have been some cases that signify risk culture problems, Yuen said. Misconduct is still a significant feature in the financial system given that over US$320 billion in fines for misconduct, including violation of anti-money laundering rules have been imposed on banks in the United States and Europe since 2009. “That has something to do with the overall risk culture of the funds not being set up properly,” Yuen said. For example, there have been instances of investment-linked insurance products that appeared to be misleading in terms of switching fee charges. Although the products were structured in a way that did not charge commission for switching of funds, the costs were actually embedded in the overall structure of the scheme. The cases were not widespread, but reforms are still needed to deter the behaviour or to help uncover such behaviour earlier, he said. Banks appear to struggle when dealing with risk culture issues owing to the expenditure costs, Yuen said. But ultimately the objective of any risk culture should be to target the customer experience and make sure they are protected and get the best possible deal, Yuen said. “We always like banks to be cautious but not to the extent of onerous requirements on customers, ” Yuen said. Hong Kong’s wealth management industry grew to HK$18 trillion (US$2.3 billion) in 2016 from HK$9 trillion in 2011. The value of retail funds have increased to more than HK$500 billion from HK$290 billion in the same period.