norman chan : hong kong's development as the premier banking hub in asia opening remarks by mr norman t l chan, chief executive of the hong kong monetary authority, at the hkma conference for independent non - executive directors ( ineds ), hong kong, 16 march 2017. * * * fellow ineds, ladies and gentlemen, 1. good morning and a very warm welcome to all of you to the inaugural annual conference of ineds of banks in hong kong! today is a very special day for us because it is the first time in hong kong ’ s banking history that we have gathered in one place over 100 ineds, which represents 82 % of the total ined population of 123. 2. today is also special because it marks an important milestone of the development of hong kong as the premier banking hub in asia. 3. in case you do not know already, the size of hong kong ’ s banking sector, as measured in the amount of banking assets, has exceeded hk $ 20 trillion by end of 2016. this equals to 8 times of hong kong ’ s gdp, which is a powerful manifestation of hong kong ’ s position as an international banking centre. having said that, one of the things that we have learnt from the global financial crisis ( gfc ) of 2008 : big is not necessarily beautiful. the bitter lessons of some of the aspiring financial centres such as ireland and iceland are clear and brutal reminder of the risks of pursuing fast expansion of the financial sector without giving proper attention to supervision and governance. the gfc has also taught us that even the largest banks in the world are not immune to failure in risk control and management and, when they failed, there would be devastating effects on systemic stability and on the society at large. 4. fellow ineds, while you may have come from a rather diverse background, i believe most of you know each other quite well already. this is because all of you have worked for decades in your respective fields, crossing the paths of a wide spectrum of industries, and have achieved proud accomplishments in different shapes and forms. it is your unique experience and expertise, your reputation and your willingness to serve the banking sector that have brought you together as ineds today at this conference. 5. as ineds, you play a crucial and irreplaceable role in the governance of the banks in hong kong, serving not only the shareholders but also the public at large, given the special and important role of

as it has always been. it is however important to note that this process has begun and hong kong is bound to be a key destination as well as the management hub for the expected gradual increase in portfolio flows from mainland china. this is a trend that financial services providers should not ignore in their business planning process. the wider external use of the rmb now, let me move on to the second important trend : the wider external use of the rmb. since the global financial crisis, mainland china has taken steps to promote a greater use of rmb outside the mainland. the rationale behind this policy move is easily understandable. at present, much of the cross - border trade and investment between the mainland and other jurisdictions are conducted in us dollars. as the mainland continues to expand its international trade and investment, and becomes more economically integrated with the rest of the world, chinese traders, investors and financial institutions will face growing foreign exchange risk if they continue to rely on the us dollar. thus, it is a natural development for mainland china to allow a wider use of rmb in its cross - border trade and investment. from hong kong ’ s perspective, this policy move presents unprecedented opportunities to us, as we can leverage on our strengths as an ifc and our unique position as a gateway between china and the world to provide a premier testing ground for offshore rmb activities. offshore rmb business has been conducted in hong kong since 2004. while the scope of rmb business was limited to retail banking initially, it has been expanded substantially to cover bond issuance, trade settlement, wealth management and further to odi settlement in january this year. these developments have built a solid foundation for developing hong kong into an offshore rmb center. let me briefly summarise these developments in three dimensions. the first dimension is rmb financing. hong kong is the first place outside the mainland that has developed an rmb bond market. so far, 34 rmb bonds have been launched in hong kong with a total issuance size of 80 billion yuan. the issuer base was expanded from only bis central bankers ’ speeches mainland chinese banks at the start, to mainland subsidiaries of hong kong banks and china ’ s ministry of finance in 2009, and further to hong kong corporations and famous international institutions like mcdonald ’ s and the asian development bank last year. any issuers, including foreign corporations and multilateral organisations, can now issue rmb bonds in hong kong, just as they can issue bonds in any other curre