derivatives booking hubs from europe to asia. this is very logical as the underlying securities and clients are based in asia. the hkma welcomes these moves and stands ready to facilitate such moves, on the condition that the booking business must be accompanied by the necessary risk management functions. again, this will enhance hong kong ’ s position as the risk management hub for asian equities and derivatives, particularly mainland related stocks. bond connect 9. by the same token, the launch of the northbound bond connect in 2017 has opened another window of opportunity for hong kong to enhance its risk management functions for offshore investors wishing to invest in the mainland bond market. it is still early days yet, but i am confident that bond connect offers attraction to those investors who prefer using a nominee holding structure through the central moneymarkets unit of the hkma. other value - add services for these bond investors would likely be launched in the months ahead. mainland - related lending 10. the bread and butter of banks are of course their lending businesses. there is no point in collecting deposits from customers if the bank cannot find useful and hopefully profitable outlet for these funds. with the rapid development of the mainland economy and the deepening of the reform and opening programme, hong kong has become the most important financial intermediation hub for investments into and out of mainland. the hkma has been collecting statistics under the category of “ mainland - related lending ” by banks in hong kong. this category includes lending to hong kong and foreign corporates investing in the mainland and to mainland corporates, mostly large state – owned enterprises. as hong kong is becoming an important source of funds for foreign direct investments into the mainland and overseas direct investments from the mainland to overseas markets, the size of mainland - related lending has grown from a very small amount in 2009 to hk $ 4. 6 trillion now, which accounts for around 45 % of the total bank loans in hong kong. this is a very significant component of our banking system and is of critical importance to the profitability as well as soundness of our banks. so clearly it is crucial that, in growing this lending business, banks must maintain a high standard of risk management in underwriting these 2 / 4 bis central bankers'speeches loans. the credit risk capability, both at the point of origination in terms of know - yourcustomer ( kyc ) and customer due diligence and for ongoing monitoring, must be enhanced to cater for the rapid growth of this new line of business

. naturally the hkma has accorded high priority in our ongoing supervision of banks to ensure that the underwriting standards are upheld all the time. i am pleased to report that the non - performing loan ( npl ) ratio, which is a key indicator to assess the credit quality of the mainland - related lending, has remained at a healthy level of around 0. 7 %, which is just slightly above the overall npl ratio of 0. 56 % for all bank loans. wealth management 11. given the rapid growth and accumulation of wealth in hong kong and the mainland, there is a strong demand for wealth management services. the asset - under - management of private banking in hong kong now amounts to roughly us $ 1 trillion. again, risk management is the key to the sustainable development of the private banking industry. there are two key aspects of risk management in the private wealth business. first, the banks must conduct proper kyc processes, especially on the source of funds and ongoing monitoring of suspicious fund flows for anti - money laundering / counter - terrorist financing purposes. second, the private banks must understand the risk appetite / tolerance level of their clients on the one hand and conduct proper product due diligence before marketing them to clients. if hong kong wishes to remain the preferred centre for private wealth management, we must strive to strike the right balance between the need to accord appropriate investor protection and allow the banks to provide user - friendly and efficient services to clients. to succeed in this endeavour, the regulators must work in close collaboration with the industry to continue adapting the rules and practices to cater for the evolving demands of the customers and the rapidly changing financial markets. there is no magic quick fix available, and i hope that the stakeholders would agree to adopt a truly risk - based approach. what it means is that the regulators should articulate the risks or problems that they seek to address while the industry should consider how proper risk management could be achieved without over - interpreting the regulations or imposing rigid processes that drive away customers. soft power 12. at the end of the day, any premier ifc must possess superior soft power if it wishes to sustain such position. soft power is the sum of a wide range of tangible market infrastructure and intangible strengths. while there must be a robust but market - friendly regulatory regime, we need to have a high degree of professionalism amongst the industry practitioners. fully cognizant of this principle, the hkma has in the last decade or so launched many soft power