Eddie Yue: What quality means to Hong Kong as an international
financial centre
Opening keynote speech by Mr Eddie Yue, Chief Executive of the Hong Kong Monetary Authority,
at the Hong Kong Management Association 2020 Quality Award Presentation Ceremony, Hong
Kong, 14 October 2020.
* * *
Helmuth, YK, ladies and gentlemen, honoured guests,
1. Good evening. It gives me great pleasure to deliver the keynote speech at tonight's
prestigious ceremony.
2. The Hong Kong Management Association and the Hong Kong Monetary Authority are like
twin brothers. Not only that we share the same HKMA acronym, but we also share similar
beliefs. We both have a deep commitment to management excellence, developing human
capital and upholding the highest standards of quality.
3. Ten years ago, at this same event, my predecessor Norman Chan shared his thoughts on
how the HKMA - the Monetary Authority, that is - can achieve quality in public service. He
said that the community expected nothing short of the highest standards of quality from the
HKMA. And he highlighted the importance of professionalism, passion and pride to our
organisation.
4. I believe the last ten years have demonstrated the truth of these words. So, tonight, I'd like to
build on what Norman said at that time by taking a broader perspective on what quality
means to Hong Kong as an international financial centre.
Quality in an international financial centre
5. We can all discern quality in products and services. We know that quality should mean
better performance and the creation of greater value. And there are many ways in which we
can look at how organisations manage quality. The seven criteria of your Quality Award,
including leadership, strategy and knowledge management for instance, provide an excellent
framework. But when it comes to an international financial centre like Hong Kong, what are
the essential qualities we should look for? And how do we achieve - or strengthen - those
qualities?
6. Let's start with the essentials. The basic function of a financial system, simply put, is to
move money around. The system channels capital from those who have a surplus to those
who need it. It moves capital around the economy like the heart pumps blood around the
body. This enables daily economic activities like paying salaries and buying groceries.
7. But an international financial centre has a further dimension. It doesn't just serve the needs
of the local economy. It also enables a host of companies, institutions and individuals from
around the world to meet more complex needs, such as financing supply chains and
managing risk. With these domestic and global dimensions in mind, I'd like to discuss two
important qualities of Hong Kong as a leading international financial centre.
Resilience is key
8. The first quality is resilience. It's easy to think of aspects of finance in which safety and
reliability are vital. In a quality financial system, we take these for granted. We believe,
rightly, that the banks entrusted with our life savings are prudent. When we transfer money,
we don't worry about whether the payment system will get the funds to where we want them
to go. We also expect that the currency we hold will be stable - and that we will not wake up
one day to find that our purchasing power has been eroded overnight.
9. In Hong Kong, you and I expect all of this to run like clockwork. And it does. But it's only
when the smooth operation of our monetary and banking systems is put under test by
severe external shocks that we will see a reflection of true resilience.
10. We all know the challenges Hong Kong has faced over the past year, including social
events, COVID-19, and the China-US tensions. Despite all these challenges for our
economy, Hong Kong's financial system has remained remarkably stable.
11. The value of the Hong Kong dollar has stayed close to the strong side of its trading band for
most of this year. There have been strong inflows to the local currency, partly because of
substantial demand for Hong Kong equities, including some large IPOs, and partly because
of the very strong market confidence in the Linked Exchange Rate System.
12. There have been talks about capital flowing out of Hong Kong, especially during the peak of
the social events last year. But if you look at the facts, total deposits in Hong Kong's banking
system rose by almost 3% in 2019. They increased by another 7.8% in the first eight
months of this year. In simple terms, the strength of the Hong Kong dollar and this
expansion of the deposit base tell us that there is more money coming in than going out.
13. Our banking system continues to be robust. Hong Kong's banks have among the highest
capital adequacy and liquidity ratios in the world. And despite a difficult operating
environment, our classified loan ratio is still low - around 0.8%. And that resilience provides
room for our banks to continue lending and providing relief measures to customers during
the COVID-19 outbreak.
14. And our capital markets are thriving. Hong Kong was the world's leading IPO centre last
year. Although global markets were tested by extreme volatility in the first quarter, our capital
markets have continued to function without incident. As several large Chinese companies
that had listed in the US seek secondary listings in Hong Kong this year, we should once
again achieve a very high ranking in the global IPO league table.
15. None of this happened by luck or by chance. The resilience we see now is the result of
sustained efforts over many years. It's the result of building capital and liquidity buffers into
the banking system; and prudently managing the reserves that support the Linked Exchange
Rate System. It's the result of enhancing our own - and the banks' - operational resilience
and business continuity plans. It's the result of communicating effectively with stakeholders
to maintain confidence in the financial system.
16. So this quality of resilience is the product of a long term investment in the many factors that
make our system strong.
Abundance of opportunities
17. The second quality of an international financial centre that I want to talk about is its ability to
generate opportunities for investors. Advanced financial centres like Hong Kong
compete fiercely with each other. We succeed by offering investors opportunities so that
they can succeed. That means we need to keep innovating, exploring new frontiers and
developing our value proposition.
18. Hong Kong's advantages in offering opportunities to global investors is mainly down to three
macro trends. I believe these will provide the impetus for us to continue growing and
outperforming.
19. First of all, financial liberalisation on the Mainland creates enormous opportunities for Hong
Kong. We have always been the dominant financial gateway between the Mainland and the
rest of the world. Today, more than half of international investors' stock and bond
investments on the Mainland are made through Hong Kong. We have also announced a
pilot scheme for Wealth Management Connect and have other initiatives under development
in the Greater Bay Area.
20. With our unique advantages and strengths - including the common law system and world-
class financial regulations and market practices - Hong Kong will remain the leading portal
for international investors seeking opportunities on the Mainland.
21. The that is creating opportunity in - and for - Hong Kong is fintech
second trend
development. We already have a thriving ecosystem for finance and technology businesses
here. This has been bolstered by the HKMA's Smart Banking initiatives, which have
catalysed digitalisation in the banking sector, driving faster and more efficient services for
customers. I'm sure many of you are finding banking and payments much more convenient
than before.
22. We will continue to work with the banking industry to apply technology to enhancing finance
for customers in Hong Kong. We will explore greater use of artificial intelligence and data
analytics in banking operations. We will also explore improvements to Hong Kong's data
infrastructure so that bank customers, particularly small businesses, can make better use of
their own digital footprint to enhance their access to finance. And we will adopt the latest
technologies for cross-border applications, such as international payments and trade
finance. Our vision for Hong Kong to become a leading global fintech hub will create a
wealth of opportunities for local and international players.
23. The third trend driving opportunity is green finance. Hong Kong is already at the forefront of
promoting the role of finance in driving the transition to a more sustainable economy. Our
government is one of the few government issuers with a dedicated green bond programme.
We have a robust green finance ecosystem that draws on experts from around the world.
As a banking supervisor, the HKMA is pushing forward a green banking framework. We are
also working with other regulators on a local taxonomy for defining green projects. And we
are seeking to prioritise investments that align with Environmental, Social and Governance
principles as we deploy the reserves entrusted to us in the Exchange Fund.
24. Our work in developing green finance is relevant beyond Hong Kong. Going back to our role
as a gateway for investment to the Mainland, Hong Kong's embrace of green finance will
also promote foreign participation in the Mainland's sustainable capital markets, which are
among the world's largest.
25. When speaking of opportunities, I should also mention the all-important element of human
capital. Our people have always been our greatest resource. We need to maintain a
highlymotivated, highly-skilled workforce to uphold the standards that give Hong Kong its
competitive edge. Through the HKMA's 'Capacity Building for Future Banking' initiative, we
have worked with the banking sector to create a long-term plan for delivering the advanced
skills our industry requires. This investment in people creates opportunities for our
workforce to advance and prosper within the fast-evolving banking landscape.
26. As with our efforts to ensure the resilience of Hong Kong's financial system, all the actions
we are taking now to create opportunities are an investment in our future. In both
dimensions, I believe this kind of long-term approach is the hallmark of a high-quality
financial system.
Concluding remarks
27. I hope these reflections have shed some light on Hong Kong's distinctive qualities as an
international financial centre. It is resilient - our institutions and markets remain safe and
sound in good times and bad. And it offers huge opportunities to local and global
participants, driven by the Mainland's continued financial liberalisation, as well as
developments in fintech and green finance.
28. My team and I are committed to upholding these qualities. We will continue to reinforce Hong
Kong's position as an international financial centre of the highest quality. This journey has no
end - and we will rely as always on strong support from everyone that we work with,
including many of you. I am confident that, by working together, we can continue to build on
Hong Kong's unique foundation - and enhance our position as one of the world's pre-
eminent financial centres.
29. It only remains for me to thank the Hong Kong Management Association for having me here
tonight; to thank you all for your attention; and to congratulate the winners of the Quality
Award - your achievements are rightly honoured today.