2  Mr Ashley Alder, Chief Executive Officer, Securities and Futures Commission. 3  See Edelman Trust Barometer 2012, Hong Kong (HK trust in banks 74% and financial services 62% compared to a global average of 47% and 45%, respectively. See slides 13 and 15). (http://www.slideshare.net/DavidRBrain/2012-edelman-trust-barometer-hong-kong-deck1232012checkedfinal#btnNext)  BIS central bankers’ speeches  1  prioritise above all the customer, not profit maximisation. Or, combining both pillars, we could summarise all that into a single, rather old-fashioned word: integrity. In theory, that’s a standard to which we are all happy to sign on to. And yet, the temptation to put product before service, profit before client, is very real. I am sure we have all seen sufficient examples in different places. I believe there are a number of actions financial institutions can and should take to guard against such dangerous practices. I will mention just three very briefly. First, greater transparency and disclosure of the benefits and risks of investment products. Second, more responsibility placed on financial institutions with respect to assessing the suitability of a product for a customer given his/her risk appetite. Third, simpler procedures and freer access for consumer to complaint and redress mechanisms. These are all things that many financial institutions have embedded into their corporate culture and I encourage all others to do the same. “The role of financial regulators (the HKMA)” This brings me to the second group, financial regulators. Given my role, I will focus specifically on the example of the HKMA.

In response to the changing landscape following the collapse of Lehman Brothers, the HKMA expanded its efforts to protect and educate consumers, and this change resulted in the creation in April 2010 of our Banking Conduct Department. I will focus first on our work to strengthen consumer protection before going on to saying something about our work on consumer education. HKMA & consumer protection In terms of consumer protection, first, the HKMA has introduced new requirements on banks and issued guidelines on the selling of investment products. These include (a) requiring audio-recording the customer risk profile assessment and sales process to provide audit trails for reviews by banks and the regulators; (b) implementing a pre-investment cooling-off period in the sale of unlisted structured products to less sophisticated customers (such as the elderly or first-time buyer); and (c) requiring banks to carry out continuous reviews of product risk and inform investors of any upward changes to the risk ratings of the products they have purchased. These requirements were in addition to existing measures introduced by the Hong Kong Securities and Futures Commission (SFC) on the supervision of securities companies’ selling activities. Second, the HKMA is active in monitoring banks’ compliance with these and other regulatory requirements through thematic on-site examinations. Banks are expected to have control processes and procedures in place to ensure adherence to the conduct regulations. In addition, to monitor compliance levels among banking staff, the HKMA conducts mystery shopping trips. Third, the HKMA has strengthened consumer protection by working with partners.