norman t l chan : remarks at the hong kong academy of finance inauguration ceremony and fellowship conferment welcome remarks by mr norman t l chan, chief executive of the hong kong monetary authority, at the hong kong academy of finance inauguration ceremony cum fellowship conferment, hong kong, 26 june 2019. * * * the honourable paul chan, distinguished guests, ladies and gentlemen, 1. a very warm welcome to all of you for joining us today to witness the inauguration ceremony cum fellowship conferment of the hong kong academy of finance ( aof ). 2. i strongly believe that the most crucial factor that differentiates an international financial centre ( ifc ) from the other aspiring financial centres is its superior “ soft infrastructure ” or “ soft power ”. i am sure you will agree with me that the quality and professionalism of the people in the financial services industry are the building blocks for the “ soft infrastructure ” that determines the competitiveness of an ifc. the mission of the academy is to serve as a centre of excellence for developing financial leadership as well as a repository of knowledge in monetary and financial research, including applied research. 3. the aof will develop and run a leadership development programme to nurture financial leaders in hong kong. the academy will invite senior management and promising talents from financial institutions, regulators, professional firms and academia in the field of finance to join as members. aof members will be invited to participate in the leadership development programme through which they can interact with the academy ’ s international advisers, fellows and other top financial leaders through seminars, workshops and small group discussions. although the academy does not offer technical or professional training, which is well served by many tertiary institutions and professional bodies such as the hong kong institute of bankers, the hong kong securities and investment institute, the treasury markets association, we will collaborate closely with these institutions as our partners to achieve the maximum synergy in accomplishing our common goal of enhancing the soft power of hong kong. 4. on the research front, the hong kong institute for monetary research ( hkimr ), which was set up 20 years ago to undertake monetary and economic research, has become a subsidiary of the aof and will expand its ambit to cover applied finance research and thought leadership. the hkimr will continue to have its own board of directors and, in addition to the existing council of advisers for monetary research, a new council of advisers for applied research has been set up to oversee the applied research work of aof.

none of these issues have been decided yet, so we welcome any constructive comments and will certainly consider them carefully. 4. one particular question that has been raised is whether deposits with rlbs and dtcs should be covered. the consultant suggested not, primarily on the grounds that excluding them would be consistent with the institutional coverage of the current priority claims provisions. moreover, the aim of deposit protection is to protect small retail depositors, i. e. depositors with deposits of less than $ 100, 000, and dtcs and rlb do not have such depositors. however, the issue of whether their exclusion from coverage might adversely affect the business of rlbs and dtcs needs to be considered. certainly one might argue that as the first $ 100, 000 of deposits of over $ 100, 000 with licensed banks would be covered, the same should apply to deposits with rlbs and dtcs. this is something that we will consider further in the light of the views that have been expressed. 5. moving on to the issue of deregulation, july, of course, will see the full abolition of controls on interest rates. this is highly significant, as such controls are surely inimical to hong kong ’ s free competition ethos. certainly this change in the status quo will provide certain challenges for institutions, but in the long run the competition, innovation and efficiency that the removal of such barriers will engender will help to keep hong kong ’ s banking sector competitive and profitable. we also, as you know, hold the view that some greater consolidation among the local banks would be desirable from this point of view, although we have not forced the issue. this is something, however, to which we would urge bank owners to give careful thought. 6. it is clear that as part of the process of deregulation of interest rates banks will be considering revising certain fees and charges. this, of course, is understandable. if deregulation is to improve competition and efficiency, banks must be free to adjust their pricing not just on interest rates but also on fees and charges. i have absolutely no argument with this. however, i very much hope that banks will display some sensitivity on this, and will bear in mind the public interest. they should also ensure that their pricing is transparent, and that customers have good notice of any changes. 7. in addition to interest rate deregulation, there are a number of other market reform measures originating from the