howard lee : opening remarks - project sela report launch conference opening remarks by mr howard lee, deputy chief executive of the hong kong monetary authority, at the project sela report launch conference, tel aviv, 12 september 2023. * * * andrew ( deputy governor of the bank of israel andrew abir ), benedicte ( head of the bank for international settlements ( bis ) innovation hub hong kong centre benedicte nolens ), ladies and gentlemen, good morning. opening firstly, i would like to extend a heartfelt thanks to the bank of israel for hosting this event and for their warm hospitality. we're in the conference center of the tel aviv stock exchange, and i must say, it is a privilege to announce the successful completion of the first joint research project between the hkma and the bank of israel from such an iconic venue in front of a high - profile audience. as you have already heard, the name " sela " was chosen to symbolise the collaborative efforts between the hkma and the bank of israel because, besides indicating an ancient israeli coin, it means " rock " in hebrew, thereby referring to the hkma's legacy in central bank digital currency research, which began in 2017 with project lionrock. for those of you who are not familiar with hong kong, the lionrock is the most recognisable mountain in hong kong. this mountain, as you can probably guess, is shaped like a lion. but it's neither its shape nor its height that made it famous, but the folklore over the past decades that today make it the symbol of the " can - do " spirit of hong kong and of its ability to turn complex challenges into opportunities for growth and development. after several months of enthusiastic collaboration and this visit, i can confidently say that this is the same spirit that i can find in this " start - up nation ". hkma's cbdc research besides having a relevant name, project sela also focused on a highly relevant subject for central banks : central bank digital currencies, or cbdcs. the research into cbdcs is a priority for many central banks worldwide, and for a good reason. the digitalisation of currency has the potential to revolutionise financial systems, redefine transaction processes, and even reshape economies. given these profound implications, at the hkma we have been extensively involved in cbdc research at both the wholesale and the retail level, in order to future - proof our

likely to strike the right balance to support durable growth over the medium term. that ’ s why authorities have already moved. last autumn we took our foot off the accelerator by removing capital relief for banks on new mortgages and, with the treasury, by re - focussing the funding for lending scheme away from mortgages towards business lending. those steps were followed by the implementation in april of the mortgage market review to reinforce banks ’ underwriting standards and the stress test to underpin their capital discipline. the fpc has a wide range of other tools if further action is justified. we can direct lenders to raise capital held against mortgages or against all credit. thanks to the fca, we are now able to recommend a tougher interest rate stress to which new borrowers are subjected when banks assess affordability. we can also make prudential recommendations about the share of high loan to income, loan to value and long tenor mortgages in banks ’ and building societies ’ new lending. in this regard, i applaud the chancellor ’ s intention to grant the fpc additional directive powers in relation to these aspects of mortgage portfolio composition. i also welcome the chancellor ’ s commitment to adjust the help to buy mortgage guarantee scheme to comply in full with any fpc actions. when we meet later this month, the fpc will weigh carefully recent and prospective changes in activity, prices and credit as well as the merits of graduated and proportionate actions to mitigate the potential vulnerabilities arising from what is the greatest risk to the domestic economy. balance in financial markets the housing market is not the only market at risk of losing balance. confidence in some core financial markets has been buffeted by revelations of manipulation of interest rate, fx and commodity benchmarks. there have been too many such episodes to think each is an aberration. we are working to restore balance through reforms based on the firm belief that the city ’ s strength is founded on markets. to restore the primacy of true markets, authorities are already seeking to : lim et al ( 2011 ) use data from 49 countries from 2000 – 10 to examine the efficacy of various macroprudential measures, including loan - to - value and debt - to - income caps, on mitigating systemic risk. they find that caps on loan - to - value ratios, caps on debt - to - income ratios, ceilings on credit or credit growth, reserve requirements, countercyclical capital requirements and time - varying / dynamic provision