Hong Kong Monetary Authority

The Hong Kong Monetary Authority (HKMA) is the central banking institution of Hong Kong. It is a government authority founded on 1 April 1993 when the Office of the Exchange Fund and the Office of the Commissioner of Banking merged. The organisation reports directly to the Financial Secretary.[2]

Responsibilities

The exchange fund was established and managed originally by the Currency Ordinance in 1935, now named the Exchange Fund Ordinance. Under the Ordinance, the HKMA's primary objective is to ensure the stability of the Hong Kong currency and the banking system. It is also responsible for promoting the efficiency, integrity and development of the financial system.[3]

The HKMA issues banknotes only in the denomination of ten Hong Kong dollars. The role of issuing other banknotes is delegated to the note-issuing banks in the territory, namely The Hongkong and Shanghai Banking Corporation, Standard Chartered Bank and Bank of China.

Policies

Monetary stability

Currency board system

It is included the Linked Exchange Rate System and noticeable features such as the Aggregate Balance, Certificates of Indebtedness and coins issued and the Outstanding Exchange Fund Bills and Notes.

The Interest Rate Adjustment Mechanism is an automatic system that maintains the stability of the Hong Kong dollar exchange rate. Lately the HKMA has been disclosing the forecast change in the Aggregate Balance attributes to increase the transparency of the Currency Board operation.

In 1995, Nobel Prize–winning economist Milton Friedman mistakenly predicted the Hong Kong dollar's demise within two years of the 1997 handover. He also predicted the absorption of the territory's financial reserves of US$43billion (HK$335.4billion) by Beijing, which would not be able to bear the subrogation of Hong Kong's monetary policy to the United States.[5]

As with any monetary system not based on a fiat money (which includes currency boards, currency unions and the traditional gold standard) it is impossible to use monetary policy to stabilise the business cycle: this means that any macroeconomic adjustment has to be achieved by changes in the prices of assets and labour. In Hong Kong, this is made easier by two factors: the first is the openness of the economy, with an aggregate demand heavily dependent on international trading partners; this reduces the risk of classic liquidity traps. The second factor is the scarce political clout of the trade unions, which makes it easier to trim the nominal salaries during recessionary times.[6] Moreover, the high saving rates and the moral stigma attached to bankruptcy have kept relatively low the level of defaults on mortgages even during the deep recessions after the 1997 Asian financial crisis and the SARS epidemic in 2002/2003.

Exchange fund

Under colonial rule, the HKMA did not place funds with local banks not rated by Moody's Investors Service or Standard & Poor's. Only the three note-issuing banks could receive deposits because they had been rated by "objective international standards".[7]

During the 1997 Asian financial crisis, currency speculators sold the Hong Kong dollar heavily and shorted local stocks and Hang Seng Index futures. The government controversially used the exchange fund to acquire HK$120billion (US$15billion) worth of blue-chip shares in a two-week market intervention, beginning 12 August 1998 with the aim of punishing and deterring currency speculators.[8] The intervention was widely criticised as being detrimental to Hong Kong's reputation as one of the world's financial centres. Democratic Party leader Martin Lee Chu-ming criticised the government for becoming "a player, a very key player" instead of being a regulator.[9] Conversely, one speculator said in hindsight that the government's intervention "raised public confidence in the market when it was near total collapse" and "prevented a bigger crisis and saved the market".

showflag	j
j	hoeng1 gong2 gam1 jung4 gun2 lei5 guk6-2
p	Xiānggǎng jīnróng guǎnlǐjú
bpmf	ㄒㄧㄤㄍㄤˇ ㄐㄧㄣㄖㄨㄥˊ ㄍㄨㄢˇ ㄌㄧˇ ㄐㄩˊ
w	Hsiang1-kang3 chin1-jung2 kuan3-li3-chü2
y	Hēunggóng gāmyùng gúnléihgúk
sl	Heung1°gong2 gam1°yung2 gun2lei5guk6*
gd	hêng1gong2 gem1yung4 gun2léi5gug2
p2	Jīnguǎnjú
bpmf2	ㄐㄧㄣㄍㄨㄢˇ ㄐㄩˊ
w2	Chin1-kuan3-chü2
y2	Gām gún gúk
sl2	Gam1° gun2 guk6*
gd2	Gem1 gun2 gug2

Hong Kong Monetary Authority

Responsibilities

Policies

Tools

Infrastructure

Banking licenses

Monetary stability

Currency board system

Exchange fund

Headquarters

Chief executive

List of chief executives

Deputy chief executives

Events

See also

External links

References