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Following is the speech by the Permanent Secretary for Financial Services and the Treasury (Financial Services), Miss Au King-chi, at the Association of International Accountants (AIA) Hong Kong Annual Dinner this evening (March 23):
K S (Jong), Kenny (Chan), distinguished guests, ladies and gentlemen,
Good evening. It gives me great pleasure to join your Annual Dinner and speak with you.
I am told by my friends in accountancy that the greatest unrecoverable loss is time - so, with this in mind, I will get straight down to business.
I will share with you some of the policy initiatives the Government is pursuing to maintain a stable financial market while, at the same time, identifying new growth opportunities for our financial services industry. I will also discuss some of the opportunities and challenges facing the accounting profession.
First though, a quick look at the global economic environment. Most economists agree that the only certain thing about the year ahead is that it is likely to be full of uncertainties.
This may not be a particularly useful observation, but it highlights that now, more than ever, we rely on a transparent and inter-connected financial system for stability.
We depend on associations like the AIA to promote international standards in financial services. This is increasingly important in today's globalised world. The dangers of financial mismanagement have become all too clear in recent years.
The Eurozone debt crisis has hit harder and deeper than most people had thought possible just a year or so ago. The Eurozone is working hard to resolve its sovereign debt issues, but the eventual outcome is far from certain.
Will Greece and other debt-laden European economies have the political will and the public support to fully implement the austerity programmes? Can the EU as an institution forge consensus among the Eurozone countries to overcome the biggest crisis since the birth of the Euro?
Across the Atlantic, will the green shoots of recovery in the US economy translate into real, sustainable growth? And here in Asia, can the emerging markets continue to deliver the growth that is necessary to keep our economies moving forward and our people in work?
These are some of the issues that governments around the world are grappling with.
Hong Kong's financial market is known for its openness and its sensitivity to external factors. In these challenging times, one of the Government's top priorities is to maintain market stability and confidence in the financial system. In this year's Budget, the Financial Secretary highlighted the importance of maintaining stability in our financial system while preserving Hong Kong's edge in financial services.
Maintaining Market Stability
A sound and robust regulatory framework is essential to help us ride out financial storms. It is one of the fundamentals supporting Hong Kong's status as a premier international financial centre.
We are not working alone. The nature and the scale of the recent crisis have called for global, co-ordinated efforts to avoid regulatory arbitrage. Hong Kong has an obligation to bring our financial regulatory regime in line with the latest G20 resolutions. Our focus is on prudential risk management and market transparency. Indeed the two go hand in hand and are complementary to each other.
To reduce systemic risk in our financial system, we are rolling out a number of G20 initiatives through legislative changes. On banking, we have enacted local legislation to implement Basel 2.5 and Basel 3 on capital requirements and liquidity standards of individual banks. On securities, we are joining global efforts to require certain over-the-counter (OTC) derivatives transactions to be reported to a trade repository, and to require certain standardised OTC derivatives transactions to be cleared through designated central counterparties. The regime will be jointly operated by the Hong Kong Monetary Authority, the Securities and Futures Commission (SFC) and the Hong Kong Stock Exchange. We have also amended the Securities and Futures Ordinance to require the licensing of credit rating agencies and their rating analysts by the SFC, and to subject them to a Code of Conduct.
In addition to fulfilling our international obligations, we are also taking our own initiatives to enhance market transparency, improve corporate governance, and provide more streamlined procedures for companies facing financial difficulties.
Last June, we introduced a Bill into LegCo to impose a statutory duty on listed companies and their directors and senior officers to take reasonable measures to ensure the timely disclosure of price-sensitive information. The Bill is targeted for enactment in April and commencement next January. This will go a long way in promoting a continuous disclosure culture enhancing market transparency and enabling the investing public to make informed decisions.
On the corporate front, we are wrapping up a decade-long exercise to overhaul our companies law with a view to modernising the existing Companies Ordinance, enhancing corporate governance, and providing a more facilitating environment for a million live companies. A LegCo Bills Committee and our team are working round the clock in a bid to enact the Companies Bill within the current term of LegCo.
In parallel, we have launched an exercise to modernise Hong Kong's corporate insolvency law to facilitate more efficient administration of company winding-up, while at the same time enhancing the protection of creditors. An important part of this exercise is to introduce a new statutory corporate rescue procedure that helps companies in distress to turn around their business and save jobs.
Promoting Market Development
Other than measures on the regulatory front, we are constantly on the lookout for new opportunities for market development. I want to highlight two priority areas, namely Renminbi (RMB) business and asset management.
We have the full support of the Central Government. In the National 12th Five-Year Plan, the Central Government pledges its support for Hong Kong to develop into an offshore RMB business centre and an international asset management centre. The visit of Vice-Premier Li Keqiang last August brought further impetus. Of the measures announced by Vice-Premier Li, more than one-third seek to promote our financial services, notably offshore RMB business. These include the wider use of RMB in trade settlement, foreign direct investment into the Mainland, investment in the Mainland's securities markets, and issuance of bonds by Mainland entities.
These measures provide important building blocks for our offshore RMB infrastructure. By expanding the channels available for the healthy circulation of RMB funds between Hong Kong and the Mainland, they increase the breadth and depth of Hong Kong's RMB liquidity pool. More importantly, they further consolidate the first-mover advantage of Hong Kong vis-à-vis other markets that aspire to become offshore RMB centres.
Another priority is asset management. With our world-class financial services, low and simple tax regime, free flow of capital, the rule of law, a deep pool of talent drawn from around the world, and an increasingly affluent population in the Asia-Pacific region, Hong Kong is well placed to become Asia's premier wealth and asset management centre. We have adopted a multi-pronged approach to promote our asset management business. The initiatives include:
* first, encouraging the launch of new products;
* second, providing fiscal incentives, for example, abolishing estate duty and offering stamp duty concession for certain ETFs trading;
* third, establishing a network of tax treaties with our major trading and investment partners to avoid double taxation;
* fourth, conducting more promotional roadshows overseas; and
* fifth, enhancing investor protection, including measures on better disclosure, and the establishment of a financial dispute resolution centre and an investor education organisation.
Take the example of new products. We are launching exchange-traded funds or ETFs constituted by Hong Kong listed stocks in the Mainland. We are also spearheading the development of a bond market in Hong Kong through the Government Bond Programme. In addition, we are facilitating the issuances of RMB bonds by the Central Government and corporations from the Mainland and overseas. As mentioned in the Budget, we shall issue another $10 billion of iBond by the middle of this year.
At the same time, we are reforming our law to support the growth of asset management business in Hong Kong. Just yesterday we launched a consultation on draft amendments to our trust law. The objective is to modernise our outdated legislation and strengthen the competitiveness of our trust services industry. We hope this will help attract more trust assets to be managed and administered here under Hong Kong laws.
Later this month, we have scheduled to consult the market on draft tax laws to provide an Islamic finance platform in Hong Kong. Specifically, we seek to level the playing field in tax treatment for Islamic bonds vis-à-vis their conventional counterparts.
We aim to introduce amendment bills into LegCo in the next legislative session to implement these two proposals to promote market development.
Development of the Accounting Profession
Last, but by no means least, the development of the accounting profession.
The accounting profession plays a pivotal role in safeguarding the integrity of our financial system. It upholds the standard of financial reporting and ensures proper and timely disclosure of financial information. This is important for protecting the interest of investors and various stakeholders.
Indeed, accountants have a stake in many of the initiatives and measures I have just outlined. These include disclosure requirements, new accounting arrangements or reporting standards and insolvency services under a revised winding-up regime, just to name a few. When contemplating these changes, therefore, we look to the accounting profession for expert advice to shape our proposals.
In face of the rapidly changing international regulatory landscape and increasing competition in the financial services sector, the accounting profession must move with the times.
Globalisation heightens the need for more cross-border collaboration and mutual recognition in accounting services. Since the end of 2010 a scheme has been implemented to allow Hong Kong listed companies that are incorporated in the Mainland to engage approved Mainland CPA firms to audit their financial statements based on the Mainland's accounting standards. Meanwhile, the HKICPA (Hong Kong Institute of Certified Public Accountants) has already made arrangements with 13 overseas counterparts on mutual recognition or exemption of examination papers. We hope this will bring "win-win" for our accounting profession.
The vast Mainland market presents tremendous potential for our accounting services. Under the CEPA (Closer Economic Partnership Arrangement) framework, we have been actively pursuing the further opening up of the Mainland market to Hong Kong CPA firms and professional accountants. We will continue our efforts in this regard.
We also see the need for more cross-border exchanges. A recent initiative we have been pursuing with Shanghai is to send undergraduates to the other city for short-term training and exposure to government agencies and financial regulators. A number of financial institutions have given us an encouraging response. I am particularly grateful to the accounting firms which have pledged their support for the pilot scheme to be launched this summer.
As the leading financial hub in Asia, Hong Kong has long been a focal point of accounting professionals from all over the world. Major international accounting bodies including the AIA are well represented here and, just like other industries, are using Hong Kong as the base of regional operations. We are delighted to see Hong Kong's accounting profession playing an increasingly significant role at the international level. For example, Hong Kong is represented on the governing body of the IFRS Foundation (International Financial Reporting Standards); and starting next year the HKICPA will be chairing the Asian-Oceanic Standard-Setters Group to contribute to the development of the IFRS.
An important task that the Government and the HKICPA are working on together is how our independent audit oversight regime could be aligned with international standards. The Government also notes the accounting profession's commitment to modernise the auditor liability regime to meet present-day market needs. As a first step, it would be important for the profession to reach broad consensus on both reform initiatives. This will provide a basis for the Government to engage relevant stakeholders and the public on the way forward.
Ladies and gentlemen, I have updated you on some of the policy initiatives that would shape the accounting profession in a climate of global economic uncertainty. We look to AIA Hong Kong to continue rendering its support and expertise to the development of the profession. That way we can all contribute more effectively to our city's development as a global financial centre.
I wish AIA Hong Kong every success in the year ahead and you all a very enjoyable evening.
Thank you.
Ends/Friday, March 23, 2012
Issued at HKT 20:07
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