Anselmo L S Teng: Macao's financial sector - exhibiting steady
development
Speech by Mr Anselmo L S Teng, Chairman of the Monetary Authority of Macao, at the 2008
AMCM Spring Cocktail Reception, Macao, 11 March 2008.
* * *
The Honourable Secretary for Economy and Finance, Mr. Francis Tam,
The Honourable Director of the Economic Affairs Department of the Liaison Office of the
Central People's Government in the MSAR, Mr. Zhou Zhikui,
The Honourable Chairman of the Macau Association of Banks, Mr. Ye Yixin,
The Honourable President of the Macau Insurers' Association, Mr. Si Chi Hok,
The Honourable President of the Macau Insurance Agents and Brokers Association, Mr. Tou
Kam Seng,
The Honourable President of the Federation of Macau Professional Insurance
Intermediaries, Mr. Frank Ip,
The Honourable President of the Macau Financial Markets Association, Mr. Chan Kam Chun,
The Honourable President of the Association of Macau Financial Employees, Mr. Ng Chi
Peng,
Distinguished guests, friends of media, dear colleagues,
Good afternoon,
First of all allow me to give a warm welcome on behalf of the Monetary Authority of Macao
(AMCM), to Mr. Francis Tam, Mr. Zhou Zhikui and the honoured guests who attend this
cocktail reception. At the same time, I would like to express my gratitude for all the help and
support you have rendered to AMCM in the past year.
Only those who have survived the harsh winter appreciate the warmth of spring. After a
severe winter which can happen only once in half a century, we gather gaily today when
flowers bloom in the mellow March air. We look back and forward to celebrate the arrival of
the Year of the Rat.
2007 is an eventful year. Global economic growth has slowed down due to the
reverberations arising from the subprime crisis originated in the US. At the same time,
financial risk which has hidden under years of economic prosperity starts to take its toll.
There is the bank run of a financial institution in the UK, heavy losses have been incurred by
giant multi-national financial groups. All these fiascos have created shock and uncertainties
in international financial markets. However, despite all these turmoils in the international
financial environment, Macao continues to enjoy a burgeoning economy. Financial risk is
under proper control while the financial sector exhibits steady development. We can attribute
all these successes to the endeavour of the MSAR Government and all sectors of our
community, the prosperous services industry and the locomotive effect of large scale
infrastructural investments. It goes without saying that we benefit much from the strong
support and continued economic growth of our Motherland.
In the past year, under the leadership of the MSAR Government, AMCM candidly fulfilled its
duties. Via its persistent, risk based prudential supervision, AMCM laid a solid foundation
based on which the Macao financial sector achieved steady development. Thanks to the
strong economy, the financial sector of Macao has scored flying colours again. We can
witness that the financial markets have become more steady and active, the number of
financial institutions is on the rise accompanied by more ramified network, financial operation
continues to expand, continued innovation is found in financial products, quality and
sophistication of service is being enhanced, asset quality continues to improve while risk
management is being strengthened.
As at the end of 2007, the number of banks in Macao stood at 28, with total assets of
MOP328.1 billion which was an increase of 20% year-on-year. Deposits were valued at
MOP268.2 billion and total loans stood at MOP108.6 billion which exhibited annual increase
of 16.3% and 42.2% respectively. Loan deposit ratio stood at 40.5%, operational profit
amounted to MOP4.146 billion while non-performing loans ratio dropped to 0.6%. Capital
adequacy ratio stood at a robust level of 14.35%.
Moreover, although the number of institutions remained the same, business volume of
nonbank financial institutions including currency exchange, remittance and securities exhibited
hefty increase by 43.6%, 47.3% and 221.1% respectively.
Simultaneously, our insurance sector scored excellent results. There were 24 insurance
institutions operating in Macao in 2007. Total annual insurance premiums amounted to
MOP3.22 billion which was an increase of 29.8% year-on-year. Among which, life insurance
premium was MOP2.25 billion while property insurance accounted for MOP970 million. In
addition, there was a marked development in private pension fund business. As at the end of
2007, there were 35 registered retirement funds in which 432 retirement plans participated
involving 78,859 employees which was an increase of 23.7% year-on-year and accounted for
28.17% of the working population. Assets under management were valued at MOP3.7 billion,
an increase of 32% year-on-year.
In handling the foreign exchange reserves and the MSAR reserve fund, we have consistently
adopted a prudent and stable investment principle. In 2007, we achieved reasonable results
in managing and growing the reserves. Foreign exchange reserve stood at MOP106.3 billion
as at the end of 2007 which was an increase of 45.4% year-on-year. At the same time the
MSAR reserve fund was valued at MOP12.24 billion, an annual growth of 5.34%.
Financial supervision is the major responsibility of AMCM. In accordance with the principles
issued by relevant authoritative international organizations, we incessantly apply our prudent
supervision to financial institutions to ensure healthy and stable development of our financial
markets and financial institutions. In the past year, we emphasized on anti-money laundering
(AML) and risk management. In AML aspect, we have continuously since the early 1990's
been revising our original AML structure in accordance with the ever changing development
of international standard and change in local environment. Our efforts are sixfold. First, we
adopted the recommendations of the mutual evaluation of APG/OGBS by formulating and
implementing a practicable action plan. We then reinforced liaison with relevant
organizations, especially the Financial Intelligence Office and relevant associations in the
financial sector to establish a mechanism for regular communication. Third, we reviewed the
execution of relevant guidelines by seeking the opinions of market participants. We are now
revising existing guidelines by also taking into consideration the recommendations of the
2006 APG/OGBS mutual evaluation and discoveries of our supervision. Fourth, we rolled out
comprehensive training for the industry, which included industry wide seminars, exchange
indeas relating to discoveries in on-site inspections, symposium on money
laundering/financing terrorism trend and case study. Fifth, we reinforced AML/CFT
propaganda. Via public media or other channels such as open exhibitions, advertisements,
and leaflets, we attempted to enhance public knowledge and cooperation in our AML/CFT
efforts. Last, we accepted technical assistance from the IMF in perfecting the procedures and
practicable arrangements relating to AML on-site inspection. In the realm of risk
management, AMCM adopts a risk-based approach in accordance with international
standard and practice in its daily supervisory work. On the premise, we continued to
supervise all authorized institutions by conducting on-site inspections, off-site surveillances
and prudential meetings. In 2007, AMCM issued "Guideline on Management of Country
Risks" and "Determination of Market Risk Adjusted Capital Adequacy Ratio" to be adopted by
financial institutions which will no doubt enhance the stability of our financial system.
In the domain of insurance supervision, we emphasized on the revision and perfection of
related legislations. At the same time we strengthened our inspection efforts, bashed illegal
insurance activities. In perfecting related legislations, we revised "Mandatory Automobile Civil
Liability Insurance" and "Mandatory Labour Civil Liability Insurance". Simultaneously, we
enhanced inspection of AML measures implemented by insurance institutions. In 2007,
AMCM carried out on-site inspections on insurance institutions operating in Macao,
accentuating our efforts in regulating the operation of our insurance market.
We strive to maintain a stable exchange rate. In 2007, China achieved record high trade
surplus. There was a hefty increase in exchange reserves. The Yuan continued to appreciate
against US Dollar which gave rise to depreciation of the Pataca against the Yuan. It fueled
the pressure on inflation in Macao. Against such a backdrop, AMCM adhered to rules of
currency board and link rate, maintained the relative stability of the Pataca, which facilitated
stable operation of the Macao economy.
AMCM promotes actively cross border financial cooperation. In 2007, as usual, AMCM
participated in activities relating to financial cooperation with the Mainland, our neighbouring
regions, countries and international organizations and encouraged the financial industry of
Macao to communicate and cooperate with overseas entities. For instance, we promoted
closer cooperation between our financial sector and Portuguese speaking countries and
actively participated in meetings with relevant international and regional organizations. We
hosted related international activities and successfully hosted the OGBS 2007 annual
general meeting. We advocated and deepened financial cooperation between Macao and
Guangdong as well as between Macao and Shenzhen. We reinforced cooperation with
various financial regulatory bodies with a view to effectively bashing illegal financial activities
through execution of cross border supervision. We actively encouraged the enlargement of
RMB business in Macao, promoted further development of RMB business, propagate the
circulation of Pataca on the Mainland, reinforced cross border settlement and cooperation in
financial infrastructure and opened up the clearing system for Hong Kong Dollar cheques.
In retrospect, we are proud to say that 2007 was again a fruitful year for the Macao financial
sector. I would like to take this opportunity, on behalf of the Monetary Authority of Macao, to
express our heartfelt gratitude for the continued guidance and support from Mr. Francis Tam;
for the care and support from Mr. Zhou Zhikui; and sincere thanks to the practitioners of our
financial sector for their hard work in the past year. I would also like to congratulate you on
the results achieved by you ladies and gentlemen in the past year. At the same time, I would
also like to thank the colleagues of AMCM for their hard work.
There are new challenges ahead at the beginning of the year. There is a shadow hanging
over the global economy right at the start. The US subprime crisis appears to be
deteriorating which adds uncertainty to the international financial markets. Financial risk has
increased. Against such an international economic and financial backdrop, it is possible that
Macao will be adversely affected to a certain degree. It is likely that the Macao economy will
experience a slow down after rapid growth. Therefore, financial institutions should put risk
mitigation as their primary objective this year. With the support of the MSAR Government
and market participants, AMCM will continue to enhance and strengthen risk management
based on the concept of risk-based supervision to ensure the stability and development of
our financial industry. Simultaneously, we shall strive to maintain the opening up,
diversification and internationalization of our financial sector to create a healthy financial
environment conducive to the sustainable prosperity of Macao.
Last but not the least, I sincerely wish you success and good health.
Thank you.