Anselmo Teng: Macao's financial sector development
Address by Mr Anselmo Teng, Chairman of the Monetary Authority of Macao, at the 2010
Monetary Authority of Macao (Autoridade Monetária de Macau - AMCM) Spring Cocktail,
Macao SAR, 18 March 2010.
* * *
The Honourable Secretary for Economy and Finance, Mr. Francis Tam,
The Honourable Assistant Director-General of the Economic Affairs Department of the
Liaison Office of the Central People's Government in the MSAR, Mr. Gao Shang De,
The Honourable Acting Director-General of the Office of the Commissioner of the Ministry of
Foreign Affairs in the MSAR, Ms. Han Xiao-yan,
The Honourable Chairman of the AMCM Audit Committee, Mr. Leonel Alberto Alves,
Dear Guests, Friends from the media, Dear colleagues
It is the beginning of the Year of the Tiger. We take this opportunity to have a joyous
gathering with friends from the industry. While wishing each other good fortune, we express
the friendship we have been sharing. On behalf of the Board of Directors of AMCM, I would
like to convey our heartfelt gratitude to Mr. Francis Tam, Mr. Gao Shang De, Ms. Han
Xiao-yan, the representatives from the Macau Association of Banks, the Macau Insurers'
Association, the Macau Insurance Agents and Brokers Association, the Federation of Macau
Professional Insurance Intermediaries, the Macau Financial Markets Association, the
Association of Macau Financial Employees, and our esteemed guests for their presence.
In 2009, citizens of the MSAR and our financial market participants cheerfully celebrated the
60th anniversary of our great Motherland and the 10th anniversary of the MSAR. 2009 also
marked the 20th anniversary of AMCM in which we fought strenuously with the global
financial crisis. It is glad to see that, under the auspices of the Central Government, the
direction of the MSAR Government and Mr. Tam, AMCM and our market participants were
able to uphold the stability of our financial system. We managed to enhance the overall
competitiveness of the industry, promote the recovery and development of the markets. I hereby
propose a vote of thanks, on behalf of the Monetary Authority of Macao, to all sectors of our
community who have contributed in defending our financial system against this worldwide
financial crisis which would rarely happen once in a century, and to our colleagues who have
proactively and assiduously performed their duties in this respect.
The global financial markets have learned a hard lesson arising from systemic risk which led
to loss in confidence due to over ambitious expansion. International financial institutions have
generally realized their own deficiencies after introspection. They therefore strive to
consolidate, avert risks and perfect internal control mechanism with a view to shaking off the
crisis at an earlier date and to restore the confidence of consumers in the financial
institutions. Regulatory authorities around the world have displayed their decisiveness in the
face of the challenge by implementing timely and appropriate measures, making visionary
arrangements to soften the blow. However, after the storm, the "exit strategy" initiated or
contemplated by various nations may conceal risks which may trigger market volatility and
thus pose an acid test for global financial system when green shoots first appear. To the
regulators and practitioners, this will be the trial we shall face.
In the realm of banking supervision, AMCM adheres to the principle of "risk-based" approach
by reinforcing risk supervision. Through the maintaining of good communication and
cooperation with the industry, it not only enhances supervision on capital, liquidity and asset
quality of the institutions, it also requires them to impose more stringent measures on
operation management and internal control. Under concerted endeavour, the banking
industry has made a turnaround. Growth has been sustained, the banking system exhibits
greater stability. As at the end of last year, aggregate assets of 27 banks amounted to
MOP426.9 billion which was a record, or a growth of 18.7%. CAR was kept at a high level of
15.6%; non-performing loan ratio was 0.61% which purported a continued good asset quality.
Deposits amounted to MOP186.6 billion, loan-deposit ratio was 60.8%. At the moment, there
is a change for the better in market operating environment which reflects a more optimistic
market perspective.
Apart from carrying out the usual onsite and offsite inspections, AMCM also pays close
attention to changes in internal operating environment of banks and external economy with a
view to issuing timely directives and suggestions. It continues to perfect legislations relating
to financial supervision to ensure that financial institutions are able to maintain stability and
enhance their ability to combat risks.
To ensure that banks are able to develop their business in a more steady and effective
manner, AMCM has issued guideline on business continuity which requires institutions to
comply with the prescribed risk management planning and preparation when formulating
sustainable operation target. A guideline on outsourcing management has been implemented
which imposes appropriate supervision on the increasing outsourcing of business operation.
AMCM has carried out guideline on management of customer complaints. To enhance the
protection of financial consumers, a draft regulatory guideline on sale and offer of financial
products and related bank disclosure has been rolled out for consultation. In this respect,
AMCM has conducted a number of discussions with practitioners on the guideline. We are
striving to strike a balance between supervision and market development by arriving at a
consensus with all parties concerned at an earlier date and hope that it can be implemented
as soon as possible this year. Moreover, in light of past experience and based on the
appraisal and suggestion of international organizations, AMCM has revised and issued
related guidelines on AML and CFT.
It is worth mentioning that, after a solid year of endeavour and coordination, the Macao
distributor institutions of Lehman minibonds have proactively proposed a repurchase
arrangement, under which 99% of the affected investors have come to terms with the
distributors. Last year saw the start of the business of RMB settlement for cross-border trade.
The scope of RMB business for individuals has also been permitted to enlarge which
purports that RMB business has entered into a new stage. At the same time, AMCM has
promoted business communication and cooperation between local financial institutions, the
Mainland and Portuguese speaking countries. Through visits, studies and seminars,
understanding with each other has been enhanced which has laid down solid foundation for
future cooperation. Moreover, through participation in the framework mechanism for study
and planning relating to Closer Economic Partnership Arrangement (CEPA) and Outline of
the Plan for the Reform and Development of the Pearl River Delta, AMCM has injected
momentum into the realization of harmonious cooperation of financial business of the two
regions. It has also created more diversified business cooperation opportunity for the industry
which has served to enlarge the scope of business for our financial sector.
In fulfilling insurance supervisory work, AMCM has carried out offsite inspections on
insurance and retirement fund management institutions, executed effective supervision,
aided by corresponding onsite inspections to enhance risk supervision. At the same time, to
enhance solvency of insurance companies, AMCM has perfected the requirements for quality
of guaranteeing assets and established regulatory system for technical reserves, which will
ensure that the institutions are equipped with appropriate financial capability and liquidity.
Although the market has experienced some volatility brought about by the financial tsunami,
local insurance market as a whole has preserved its stability and vitality. Premium receipts
for all sorts of insurance have remained stable, but claims have not shown any abnormality.
Profit has gradually returned to pre-eruption level. Total premiums for 2009 amounted to
MOP3.26 billion, of which MOP0.93 billion belonged to non-life, while life premiums
amounted to MOP2.33 billion, gradually approaching record of the previous year.
To maintain stability of our community and safeguard the livelihood of retirees, AMCM
indirectly promotes development of the business via supervision on pension fund
management institutions. As at the end of 2009, total assets under pension fund
management amounted to MOP5.16 billion, an increase of 23%, which would benefit
74,600 employees. Besides, according to original plan, AMCM has implemented
arrangements relating to new limits of indemnity and increase in premiums in respect of work
injuries and professional diseases. There is also a civil liability insurance issue involving
adjustment of premiums and limits of indemnity for business vehicles in response to the
special operating environment of the trade. Under the proactive coordination of our staff,
there have been candid communications between numerous entities in order to strive for a
consensus.
To perfect insurance related legislations, including those involving insurance agents and
brokers, the proposed amendments have been rolled out for initial consultation as scheduled,
while the work relating to revisions of specific articles has been in orderly progress.
Simultaneously, in line with the spirit of CEPA, and to create a wider business scope for our
insurance practitioners, AMCM has been in consultation with the insurance regulatory body
of the Mainland to set up a qualifying examination centre in Macao for our insurance
practitioners. The initial response has been encouraging. In addition, in line with the spirit of
the Outline of the Plan for the Reform and Development of the Pearl River Delta, AMCM is
proactively studying the feasibility of encouraging the practitioners to probe along the
direction of closer cooperation with their Mainland counterparts.
As at 31 December 2009, the foreign exchange reserves of the MSAR stood at
MOP146.6 billion, an increase of MOP19.4 billion from last year, or 15%. At the same time,
the MSAR Reserve Fund amounted to MOP12.8 billion, which increased by MOP400 million
year-on-year, or 3%. In view of the turbulence of the investment markets, which was
aggravated by the volatility of FX, debt market and interest rates, AMCM insisted on a
prudent and sturdy investment strategy and arrangement, which embodied the target of
maintaining the value and enhancing income for our FX reserves and Reserve Fund. The
substantial FX reserves provide fundamental guarantee for stable convertibility of the local
currency.
The mastering of financial information and related statistics enables regulators and
practitioners to perform self-assessment in respect of their own results. Such information
also provides valuable and pivotal reference for policy formulation. Last year, AMCM kicked
off a series of timely and innovative surveys and disseminations of statistics, including credits
granted by local banks to small and medium sized enterprises, international business of
banks, use of locally issued credit cards and balances, and mortgage loans granted by
banks. In addition, we reinforced our cooperation and communication with international
financial organizations. We followed closely the requirements of international financial
statistics by participating in organizational information dissemination mechanisms. In this
way, we continuously enhance the reputation of our financial sector internationally which will
arouse the interest of international funds to share our development. It also promotes the level
of internationalization of our financial sector. Moreover, participation in training and
communication involving international financial institutions will enhance our capability in
professional research and analysis, reinforce credibility and authority in the course of
financial policy formulation and implementation.
Looking forward to 2010, international financial scenario is still riding on its V shape rebound,
following the recovery of major economies. We are not yet sure of an utter recovery, but we
see light from the other end of the tunnel in the midst of fluctuations. However, there are still
many factors of uncertainty which may give rise to changes, especially the "exit strategy"
contemplated by a number of nations. The act will no doubt wreak havoc on the nascent
economic recovery. As an open regional economy, Macao is not immune to the fluctuations
of external economies. Therefore, we should stay vigilant against even the smallest changes
in the international financial markets and be ready to master the information to formulate
preventive measures in a timely manner, so as to reduce the impact of adverse factors
inflicted on the overall economy and financial system. As regulator, we hope to work with
market participants to pay close attention to the future development of the markets, maintain
close communication and cooperation with each other to take on all possible difficulties and
challenges.
The word "crisis" in Chinese language is composed of two words; danger and opportunity. In
the face of a crisis, we also clearly see opportunities ahead. The Central Government has
reiterated that our Motherland shall always back up the development of the MSAR. Under the
auspices of the Central Government, we shall weather the storm and pass the test.
Moreover, under the Outline of the Plan for the Reform and Development of the Pearl River
Delta and the framework of CEPA, the prospect for economic and financial cooperation
between the MSAR and the Mainland appears to be broad and bright. The temporary
measure adopted by the MSAR at the beginning of the financial tsunami to provide full cover
for all deposits will expire at year end. AMCM is proactively consulting market participants
about a subsequent arrangement. We hope to arrive at an solution satisfactory to all parties
concerned.
As usual, under the leadership of our Chief Executive, Mr. Fernando Chui and the guidance
of our Secretary for Economy and Finance, Mr. Francis Tam, in addition to the support and
cooperation of the practitioners, AMCM shall sturdily fulfil its duties in upholding the stability
of the local financial system and promoting the enhancement of market development.
Shoulder to shoulder with our practitioners, we shall strenuously promote the development of
our financial industry to become an important element in the course of economic
diversification of the MSAR. The financial industry shall act as an economic lever to provide
the necessary driving force with a view to achieving sustainable economic development and
prosperity and hence the stability of the community of the MSAR.
Thank you!