changes now going on in banking services, including the restructuring of fees and charges, are not solely the result of interest rate deregulation. there are a number of factors – global as much as local – that are driving banks into refocusing their business. these include : increased competition from both within and outside the banking industry ; pressure to increase shareholder value ; the need to develop new income streams amid a shortage of conventional lending opportunities ; and globalisation, which is inducing banks to specialise in forms of business in which they have a competitive advantage. these various factors are forcing banks to innovate - through new products and new technologies – in order to diversify their income. they are also forcing banks to become more cost - efficient : to scrutinise the profitability of their various services, and to rationalise cost structures. the result in many cases has been substantial changes in retail banking services : for example, the selling off of business units, the closing down of branches, the expansion into fee - based business, such as mpf and insurance services, the development of more cost - effective modes of service delivery, such as the atm network and the internet, and the imposition of specific fees and charges on services that did not incur fees and charges in the past. consumers also need to react to the changing environment – for example, through making use of delivery channels such as atms, telephone banking or the internet that reduce the cost of using banking services. cost minimisation also provides the incentive for consumers to shop around, and new technology in the form of the internet enhances the means of doing so. with the shopping around comes awareness of what else is on offer, and greater expectations on the part of the consumer. less positively, there has been disruption and anxiety, which has been reflected in the steadily growing number of complaints and protests, and in the greater political attention being paid to this subject. what is the stance of the hkma? we do not, as i have already said, regulate fees and charges. but we seek to ensure that there is transparency in the provision of services, particularly in the setting out of fees and charges. the code of banking practice, which is a non - statutory code issued jointly by hkab and the dtc association with our endorsement, is the main tool for achieving this end, and, as you all know, the code is currently being subjected to extensive revision and strengthening. this process is almost at an end and we believe

however, a number of concerns have also been voiced. i will not go into these in detail, but some of the questions that have been raised are as follows : is the hkma interfering too much in the way in which banks choose to manage themselves? is too much burden being placed upon the board, and upon non - executive directors in particular, in terms of establishing policies and controls? should there be a distinction between listed and non - listed banks? is it right to place more onerous requirements on banks compared with other companies, for example as regards the required number of independent directors? and is it going to be possible to find sufficient independent directors of the right quality? i have answered some of these questions already in this speech. we do believe that banks are different from other companies because they are looking after other people ’ s money. from this point of view, it does not matter whether the bank is listed or non - listed. we also believe that banks are exposed to special risks compared with other companies, and that the board needs to ensure that policies are in place to manage these risks. this is not to say that the board should actually formulate these policies itself. that can be left to management. but the policies should certainly be approved by the board. as to whether we are placing too much burden on the non - executive directors, it should be recognized that being a director of a bank does involve heavy responsibilities. moreover, the criminal sanctions in the banking ordinance apply to all directors, whether they are executive or non - executive. we acknowledge that it may not be an easy task to find non - executive directors with the right skills and degree of independence. we have therefore reconsidered our original recommendations on the number of independent directors to some extent, particularly in relation to restricted licence banks and deposittaking companies, and we are prepared to give institutions which do not already comply more time to do so if necessary. finally, on the complaint that we are perhaps being too intrusive, i would point to our statutory responsibilities under the banking ordinance to ensure that institutions operate with integrity, prudence and competence and that individual directors are fit and proper. concern about corporate governance falls squarely within these responsibilities. however, let me stress that this is not an area where we would want to take a narrow legalistic position. we are anxious to work closely with the banking industry to arrive at a mutually acceptable approach to corporate governance which is appropriate to the particular circumstances of hong kong. we will