, banks should treat their customers fairly when providing various services and financial products to them, and should stand in customers ’ shoes in pursuing profit. but how can we achieve this? in the past few months of discussion with the industry, we found that the basic principles of fair treatment to customers are indeed not so complicated. mr benjamin hung, chairman of the hkab, will brief us on the five principles in the charter. 5. some people wonder why don ’ t we simply make the charter part of the hkma ’ s regulatory requirements for banks given the importance of fair customer treatment? my reply to this is that : banks have to deal with tens of thousands of customers every day to provide a great variety of services and conduct countless transactions. while imposition of regulatory rules would bring about some effects, no external rules could possibly be all - pervasive, more difficult still about transforming the corporate culture or long - standing values in workplace. fair treatment of customers ought to be firmly embedded in the corporate culture of banks that all personnel – from board of directors, chief executives, senior management, to frontline employees – will accept, defend and uphold treating their customers fairly as a guiding principle. banks ’ incentive mechanism must also promote and support this culture in every aspect of the banks ’ operations. bis central bankers ’ speeches 6. bank customers, as consumers of various types of bank products and services, should receive appropriate protection. while banks should treat their customers fairly, the latter should also be responsible and smart. the most basic requirement is that customers should try their best to understand the products and services provided by banks, including credit cards, personal loans, home mortgages and wealth management products, their relevant risks, costs and expenses, and whether the products and services are suitable for them. bank customers cannot and should not blindly blame banks every time an investment loss is incurred or when they get into financial troubles due to excessive borrowing. banking customers ought to be responsible and smart. only then could there be a sustained win - win situation for all concerned. in this regard, the hkma will shortly launch a consumer education programme to help the public learn more about how to become a “ smart and responsible ” financial consumer. 7. this is why the hkma has been working with the industry in the past months in developing the charter. i am pleased to see that the charter has received the full support of 22 retail banks in hong kong. these banks are here today to sign and launch this charter, pledging to

we are scarcely off track at all, from what appears to have been a secular trend of real appreciation of the currency. but others might argue that the structural changes of the eighties and nineties which were consistent with an appreciating real rate because of much more rapid productivity gains in the tradable than in the non - tradable sectors, cannot be repeated, so that the assumption of a continuing secular uptrend is invalid. on that view, the net appreciation over the past couple of years may be deemed to have dragged us away from our preferred path. it is hard to judge where the proper balance of these views lies. i recall how, 15 - 20 years ago, the doom merchants were prophesying the end of hong kong ’ s long run of growth because we were rapidly losing competitiveness in much of manufacturing. presumably they did not slides are not included in this text document. foresee the remarkable extent to which the service sector would develop as an alternative wealth - generating lynchpin of the economy. now, the next generation of doom merchants is prophesying imminent disaster as competitiveness in certain parts of the service sector appears to have been eroded. will they be wrong again? have they failed to appreciate the true workings of the market economy and comparative advantage? do they not realise how difficult it is to foretell exactly how an economy will evolve, even though the evolution is taking place right under our noses? indeed, as we sit here worrying about it, there are people out there who are busy exploiting niches and opportunities which will mould the future structure of the economy. we can try to facilitate that process, or even to guide particular aspects which we reasonably expect to be important ( eg the cyberport ), but there will always be surprises. in any analysis of competitiveness there is inevitably scope for argument about the appropriateness of the statistics one is using. i believe that in the current hong kong conjuncture the popular measures such as the real exchange rate may have been lagging somewhat behind the recovery of competitiveness that may have actually occurred. business decisions are influenced more by marginal prices and expectations of future prices, than by prevailing average prices ; yet the measure of rentals which enters the cpi is typically based on an average of outstanding contracts and not the price at which new contracts are being struck which have over the past year or so fallen much more steeply. thus, when thinking of business decisions, even assuming that residential rentals are a