Blog

Think out of the box

Over the past two years, the current-term Government has undertaken various initiatives to foster economic development and improve people’s livelihood. Taking the financial services industry as an example, we attempted to think out of the box to promote its further development and cement Hong Kong’s status as a world-class international financial centre. At the same time, we stepped up efforts to safeguard the stability of our financial system and enhance the quality of our financial market.

On these fronts, substantive progress has been made over the past two years. First of all, we reformed Hong Kong’s listing regime last year under which emerging and innovative enterprises with weighted voting rights structure, as well as pre-revenue or pre-profit biotechnology companies, are allowed to be listed in Hong Kong, thereby reinforcing the depth and breadth of our financial market and boosting its competitiveness. In 2018, Hong Kong again claimed the global crown in terms of the value of fund raised through Initial Public Offerings (IPOs). At the same time, we are seeing encouraging results in the promotion of wider application of fintech. In addition to the successful launch of the Faster Payment System (FPS), quite a few licences for virtual banks and virtual insurers have been granted. We have also facilitated the banking industry to make available their financial data and information for public access via Open Application Programming Interface (API).

The launch of FPS has been well received by the general public and enterprises, while the granting of eight virtual baking licences has spurred competition. Several major traditional banks have removed their minimum deposit requirements and the associated charging fees. This will benefit the public and promote financial inclusion.

In promoting the development of Hong Kong’s financial industry, we attach great importance to market quality and institutional arrangements with the aim to safeguard the efficiency, integrity, openness and transparency of our financial market as well as ensure proper regulation on par with international standards and best practices. In this regard, we fulfil our necessary obligations and play an active role in the governance of the global financial system thereby making us an international financial centre renowned for not only its competitiveness but also its commitment to upholding the integrity of the financial system.

I am pleased to share that we have achieved remarkable results in this aspect. To begin with, for the purpose of enhancing tax transparency and combating cross-border tax evasion in the international arena, we implemented the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which came into force on September 1, 2018 allowing Hong Kong to participate in tax information exchange with relevant jurisdictions and implement the automatic exchange of financial account information in tax matters (AEOI) as advocated by the Organisation for Economic Co-operation & Development (OECD). We have also amended the Inland Revenue Ordinance to combat base erosion and profit shifting by multinational enterprises as promulgated by the OECD.

In addition, as we can observe from the financial crisis in 2008, risks of one economy could be contagious to other regions and even globally. As such, managing financial risks properly is conducive to not only our own interest but also international financial stability. For the management of risk of our banking system and securities market, we have been implementing the requirements set by the Basel Committee on Banking Supervision and Financial Stability Board in a timely manner. The Staff Report released by International Monetary Fund (IMF) earlier this year recognized Hong Kong’s efforts in maintaining robust financial regulation and supervision.

Another aspect of financial regulation which is equally important but might be overlooked is our effort in anti-money laundering and counter-terrorist financing (AML & CTF). With increasing degree of freedom in global capital movement, money laundering (ML) activities usually involve cross-boundary element and require effective international collaboration. Comprising 39 major economies, the Financial Action Task Force (FATF) is the key platform to combat ML. It conducts peer reviews of member jurisdictions regularly to assess their compliance with the international standards under a mutual evaluation process. So far only five out of 23 assessed jurisdictions have been rated overall compliant by the FATF under this mutual evaluation process.

Over the years, the Government has always been committed to establishing an AML regime on par with international standards. To gear up for the mutual evaluation of Hong Kong, the Central Coordinating Committee on Anti-Money Laundering and Counter Financing of Terrorism which I chaired has spearheaded the preparation at an early stage including the relevant legislative amendments. With the support of the Legislative Council, five relevant pieces of legislation on AML & CTF were passed. Various public bodies, including the law enforcement agencies, the Department of Justice, and the relevant regulatory bodies, have worked concertedly in enhancing the effectiveness of our AML regime.

Last year, the FATF kick started the 18-month mutual evaluation of Hong Kong. The exercise was undertaken by an assessment team comprising 10 experts from various jurisdictions. In mid-June, the Mutual Evaluation Report of Hong Kong was examined by the full FATF membership at its Plenary held in Orlando, the US. The Report finds that Hong Kong has a strong legal and institutional framework for combating ML and terrorist financing, and is particularly effective in the areas of risk identification, law enforcement, asset recovery, counter-terrorist financing and international co-operation. Hong Kong is the first jurisdiction in the Asia-Pacific region to have achieved an overall compliant result.

Apart from government bureaux and departments, various professional bodies and public organisations have together paid tremendous efforts in preparing for this mutual evaluation. This team spirit is a strong testimony to our determination to safeguard Hong Kong's interests. I would like to take this opportunity to express my heartfelt gratitude to our colleagues and friends from different sectors who took part in this exercise.

June 30, 2019