Eddie Yue: Welcome remarks at the HKMA-BIS joint conference
Welcome remarks by Mr Eddie Yue, Chief Executive of the Hong Kong Monetary
Authority, at the HKMA-BIS Joint Conference "Future-proof Supervision for an
Innovative Banking World", Hong Kong, 24 March 2023.
* * *
Governor Hernández de Cos, distinguished guests, ladies and gentlemen,
Good morning! It is a great pleasure to welcome you to this Conference, jointly
organised by the BIS and the HKMA. I am especially pleased to see friends from
different parts of the world - central bankers, banking supervisors and financial leaders
present here today.
I know that many of my fellow regulators have been here in Hong Kong for a few days
already, for the Basel Committee meeting to discuss policy issues of core interest to the
regulatory community. The HKMA is honoured to have had the opportunity to host the
Basel Committee meeting, which was the first physical meeting held outside Basel
since COVID broke out in 2020. I hope that apart from attending the Committee
meeting and the Conference, you will have time to go around Hong Kong and feel the
vibrancy here.
Today's event is the first international financial regulatory conference after all the social
distancing measures in Hong Kong were lifted. And travel between Hong Kong and the
Mainland is back to normal. Everything is now business as usual in Hong Kong, back
to how things were before the pandemic. Nothing beats experiencing Hong Kong for
yourself. This Conference is an excellent opportunity for our friends from around the
world to personally experience that "Hong Kong is back!".
How did we go from strength to strength?
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This Conference is also significant because this year marks the 30 anniversary of the
HKMA. Not only that, it's also 25 years since the BIS Representative Office for Asia and
the Pacific was established in Hong Kong. Throughout those 25 years, the HKMA has
been supporting the BIS's efforts to foster dialogue and collaboration among central
banks and monetary authorities in the region. We are honoured to be co-organising
this event with the BIS in this special year.
In Chinese Confucian teaching, reaching 30 years old is an important benchmark.
There is a saying in The Analects of Confucius , meaning that 30 is the age when
someone can stand on his or her own feet. As the HKMA is celebrating its 30th
anniversary, it is an opportune time to look back over our journey and reflect on the
important milestones we have gone through over the past three decades.
As with other central banks, the HKMA has a financial stability mandate. Our job is to
avoid crises as far as possible, and to deal with the ones that do happen and mitigate
their impacts on the financial system. In these 30 years, we have weathered many
crises and challenges, learning lessons from each one and becoming more resilient and
adaptable.
For me, the two most unforgettable events are the Asian Financial Crisis in 1997-98
and the Global Financial Crisis (GFC) in 2008. In particular, the GFC in 2008 revealed
inherent weaknesses in the global financial system. To address the shortcomings in
the banking system, the Basel Committee has been pivotal in driving a series of
regulatory reforms, most notably the Basel III framework, to strengthen banks' capital
and liquidity requirements, and keep leverage at safer levels. The HKMA has been
playing an active part in the formulation and implementation of these new
standards. These reforms proved to be crucial in ensuring the resilience of the global
banking system during the pandemic.
Bracing for the future
Much has been achieved, but much remains to be done. Our experience accumulated
over the past 30 years has laid a strong foundation for us to brace for what's to come.
To stay ahead of the curve, we have to constantly identify where the risks are coming
from in order to better equip ourselves for potential cracks in the financial system.
As I mentioned earlier, in the wake of the GFC, regulations on the banking sector have
been strengthened significantly. And for a prolonged period of time, the global interest
rates had been kept at exceptionally low levels. However, the monetary environment
has changed significantly over the past year, as major central banks around the world
have been simultaneously raising interest rates at an unprecedented pace to curb
inflation. Such an abrupt tightening of monetary conditions will be a real test of the
resilience of the global financial markets and banking system.
In fact, the first cracks have started to surface in some US regional banks in the last two
weeks. The fallout has put pressure on market confidence, which has spread across the
Atlantic to Europe, resulting in one of the oldest Swiss banks being taken over. Things
are moving fast, and we have to stay alert and be well prepared.
In addition to these latest developments, there are two areas we should watch out for.
The first is non-bank financial intermediation, which are playing an increasing role in
providing funding to the real economy. The market incidents in the past few years have
reminded us that the build-up of leverage and liquidity imbalances in non-bank entities
could amplify volatilities in the wider financial system. It is therefore important to
strengthen the resilience of non-bank financial institutions and reduce their procyclicality
in times of system-wide stress.
Another area is crypto assets. Technological advancement has been a game changer
for the financial world. Financial institutions are seeking to embrace new technologies
in order to stay relevant. But sometimes, financial innovations will also bring challenges
to market players and regulators alike. Recent events in relation to crypto assets serve
as a wake-up call that the linkages between the financial system and the crypto space
are already very intertwined. And such interconnectedness may grow even further in
future.
These events underlined the importance of reflecting on what more can be done to fill
the gaps, so that the associated risks will not be propagated to the broader financial
system, and ultimately the real economy. In this process, it will be crucial for central
bankers and regulators around the world to work collectively on coordinated policy
responses for implementation in individual jurisdictions.
What also matters is making sure we have a full set of tools at our disposal. These
include micro-prudential instruments focusing on individual institutions, and
macroprudential tools for the stability of the financial system as a whole. Currently, the higher
interest rates are not the only challenge facing the global economy. Economic growth
is also slowing and inflation remains high. We can expect the macro-prudential tools
will play an increasing role in supporting the real economy and financial stability.
The BIS and the Basel Committee are useful platforms that foster communication and
coordinate policy responses among central banks and regulatory authorities. We, at the
HKMA, will build on our experience and continue to participate actively in the work of
these international fora to make our contribution to global financial stability.
Today's Conference
This is where today's Conference comes in.
Carrying the theme of "Future-proof Supervision for an Innovative Banking World", this
Joint Conference with the BIS brings together distinguished speakers from the
regulatory community and the financial industry to share their valuable insights and
experience on how to better prepare for the future.
In particular, we are honoured that Governor Hernández de Cos, the Chair of the Basel
Committee, will give a keynote speech on how macro-prudential tools can complement
micro-prudential supervision to strengthen financial stability. Other distinguished
speakers will exchange views on how to make the banking system more resilient amid
the fast-changing financial landscape. And the fireside chat during the lunch session
will discuss the lessons learnt from recent crypto incidents and explore the future of the
crypto market.
The speakers today are all very experienced in their fields. I'm sure that the thoughts
and ideas exchanged today will leave each one of us more informed and better
prepared.
I'm, again, very grateful to all those who are present today.
As a final note, this Conference is only the start of a series of celebration events for
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HKMA's 30 anniversary, and one of the major international events this year to
showcase "Hong Kong is back!". Many more are in the pipeline, and we will announce
them in the coming weeks and months. Do stay tuned and I hope to see you again in
the near future.
Thank you.