Views of the Governance of the Hong Kong

Views of the Governance of the Hong Kong Monetary Authority Stephen Y. L. Cheung Professor (Chair) of Finance Department of Economics and Finance City University of Hong Kong 2 June 2003 Stephen Cheung Governance of HKMA

Content n Central Bank Independence n HKMA’s Governance Structure n Alternative Governance Structure n Future Development Stephen Cheung Governance of HKMA 2

Central Bank Independence n Definition and Rationale n Central Bank and the Markets n Central Bank Independence and Creditability n Central Bank Independence and Accountability Stephen Cheung Governance of HKMA 3

HKMA n Monetary Stability n Banking Stability n Financial Infrastructure Stephen Cheung Governance of HKMA 4

HKMA – Advisory Committees n EF Advisory Committee q Subcommittee on Currency Board n Banking Advisory Committee n DTC Advisory Committee Stephen Cheung Governance of HKMA 5

Alternative Governance Structure n EF Advisory Committee n de facto management board n Replace by the Board of Director Stephen Cheung Governance of HKMA 6

Alternative Governance Structure n Board of Directors q CE and Deputy CE of the HKMA q FS as ex-official q Independent members Stephen Cheung Governance of HKMA 7

Alternative Governance Structure Board of Directors n Functions q 1. Review HKMA’s performance in relation to its objectives and strategies 2. Monitor the extent to which the objectives set in relation to HKMA’s financial management have been met 3. Review the internal financial control of HKMA 4. Determine the remuneration package of senior executives of HKMA Stephen Cheung Governance of HKMA 8

Alternative Governance Structure n Board of Directors q Two Sub-committees should be formed only by independent members on sensitive matters Board of Directors Other Existing Sub-committees Stephen Cheung Remuneration Sub-committee Governance of HKMA Audit Sub-committee 9

Alternative Governance Structure n Audit Subcommittee q q q n Internal financial controls Financial management Risk management Remuneration Subcommittee q q Review HKMA’s performance Determine remuneration and pension of senior management Stephen Cheung Governance of HKMA 10

Alternative Governance Structure n Cautions q q Independent members should be ‘real’ independent – creditability of the Board Independent members should be nominated by the Board and appointed by the CE q Fixed term q Transparent Stephen Cheung Governance of HKMA 11

Future Development n ‘Empire’ building? n Super-regulator? q n Similar to the UK Future monetary policy? Stephen Cheung Governance of HKMA 12

The End Thank You! Stephen Cheung Governance of HKMA