This aerial photo taken on June 27, 2017 shows the scenery on the both sides of the Victoria Harbour in Hong Kong. (LUI SIU WAI / XINHUA)
HONG KONG – The Hong Kong government on Wednesday welcomed the International Monetary Fund (IMF) report which reaffirmed the city's position as an international financial centre with a resilient financial system, sound macroeconomic and prudential policies, and robust regulatory and supervisory frameworks.
In a statement, the government noted that the IMF’s Financial System Stability Assessment Report showed that Hong Kong's macroeconomic and prudential policies have provided it with important buffers to cope with the current economic slowdown and future shocks.
“Rigorous stress tests performed by the IMF confirmed that Hong Kong's financial system remains resilient in extreme stress scenarios,” the statement reads.
The government noted that the IMF’s Financial System Stability Assessment Report reaffirmed the city's position as an international financial centre with a resilient financial system, sound macroeconomic and prudential policies, and robust regulatory and supervisory frameworks
The report noted that robust regulatory and supervisory policy frameworks are in place to support the financial sector's development, and the institutional framework for systemic risk monitoring and oversight is well established.
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“The banking sector remains well capitalized, profitable, and nonperforming loan ratios remain low," the IMF report reads.
"Hong Kong SAR’s exchange rate mechanism, the Linked Exchange Rate System, has continued to support financial stability, and is underpinned by large foreign exchange reserves,” it added.
Hong Kong is a major international financial centre with one of the largest financial sectors in the world. Its banking system holds assets equivalent to around 9.5 times its gross domestic product (GDP), and is a major contributor to the profitability and total assets of several global systemically important banks.
The city is a global asset and wealth management centre, with assets under management amounting to 10 times its GDP in 2019, and it hosts one of the world's largest stock exchanges, with a market capitalization of US$6.1 trillion.
The financial hub’s life insurance sector is also among the world's largest, and it has the largest foreign exchange swap market in Asia, the report added.
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Financial Secretary Paul Chan Mo-po said the positive appraisal clearly recognizes the government's long-standing efforts to safeguard financial stability.
“We will continue to reinforce our core strengths, give full play to our unique advantages and identify new areas of growth, with a view to ensuring the long-term competitiveness and prosperity of Hong Kong,” Chan said.
Secretary for Financial Services & the Treasury Christopher Hui Ching-yu thanked the IMF for its fair and balanced assessment, which again confirmed the resilience and stability of Hong Kong's financial system.
The government also welcomed the IMF's assessment that policy oversight of the financial system is strong and has been modernized.
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According to the report, banking supervision and regulation in Hong Kong continues to be strong, and that regulation and supervision in the insurance sector has been strengthened following the establishment of the Insurance Authority.
It welcomed the authorities' efforts to address the risks of climate change, including the implementation of climate-related mandatory financial disclosures by 2025, adoption of the Common Ground Taxonomy, and promotion of climate-focused stress testing for the financial sector.
The report noted that the crisis management framework in Hong Kong has been significantly strengthened by the introduction of a comprehensive resolution regime under the Financial Institutions (Resolution) Ordinance in 2017, further safeguarding the stability of the financial system.
Hong Kong is well-positioned to develop financial technology and acknowledged the rapid development of the fintech industry, according to the report.
It added that the authorities play an active role in promoting the city as a fintech hub in Asia and adopt a proactive approach to promote financial innovation and inclusion.
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The report also noted Hong Kong's solid regime to fight money laundering and terrorist financing.
The government said it will carefully study, together with financial regulators, the recommendations the IMF made to enhance the already robust financial system.
The IMF Mission visited Hong Kong in September 2019 and conducted a virtual mission in February and March for discussions with government authorities, financial regulators and market players.The report was considered and adopted by the IMF Executive Board on May 21.
With inputs from Oswald Chan