eddie yue : opening remarks at the commencement event of e - hkd pilot programme opening remarks by mr eddie yue, chief executive of the hong kong monetary authority, at the commencement event of e - hkd pilot programme, hong kong, 18 may 2023. * * * good afternoon, everyone. a very warm welcome to all of you for joining today's commencement of the e - hkd pilot programme, especially to those of you flying from other parts of the world. central bank digital currency, or cbdc, is one of the hottest topics in the central banking community today. over a hundred central banks are studying it and a few dozens of them are working on various types of pilot trials. the hkma has been researching and piloting on cbdc since 2017. apart from the exciting work that we are doing with our three partner central banks on the application of wholesale cbdc under project mbridge, the hkma has also been exploring the prospect of issuing retail cbdc, or e - hkd, in hong kong. e - hkd is beyond technology we conducted two rounds of market consultation in the past two years. overall, the respondents are supportive of the e - hkd initiative and believe that e - hkd has the potential to make payments faster and more efficient while supporting the digital economy. however, we are cognizant of the fact that e - hkd is not and should not be merely a technology project. its implementation would entail far - reaching implications on a wide range of issues relating to areas such as legal, regulatory, policy, financial stability, privacy, cybersecurity, and interaction with existing payment methods. we also understand that e - hkd would be a critical and complex financial infrastructure project that may take years to complete. therefore, we announced in september last year that we would adopt a three - rail approach to pave the way for possible implementation of e - hkd : rail 1 aims to lay the technology and legal foundations for supporting the implementation of e - hkd. rail 2 focuses on application research and pilots, and it runs in parallel with rail 1. rail 3 is concerned about launching e - hkd, which will depend on the actual progress made under rail 1 and rail 2, as well as the pace of relevant market development. this comprehensive three - rail approach will ensure that hong kong continues to play a leading role in the global financial landscape by getting ourselves ready as best as we can in terms of implementing retail cb

quality common equity to risk - weighted assets at the largest banks now exceeds the average for smaller banks. the larger and more complex banking organizations are now holding more capital, commensurate with the greater risks their distress could pose. reduced vulnerability associated with liquidity and maturity transformation similarly is due importantly to key financial reforms instituted since the crisis. large financial institutions are required to maintain substantial buffers of high - quality liquid assets ( hqla ) calibrated to their funding needs and to their likely run risk in stressed conditions. similar to the capital buffers, the liquidity buffers are greatest for those financial institutions that pose the greatest risks. indeed, banks are holding buffers of hqla in excess of their liquidity coverage ratio ( lcr ) requirements. our largest banking firms have increased their holdings of hqla from 13 percent of assets in 2011 to 20 percent in 2017 and have reduced their reliance on short - term wholesale funding from 36 percent of liabilities in 2011 to 29 percent in 2017. 6 just as our strengthened policy framework helps modulate vulnerabilities in the financial sector that could make the economy more vulnerable to shocks, so, too, our quarterly surveillance is intended to identify rising vulnerabilities early enough to be able to act to prevent disruptions that could damage the economy. in particular, the quarterly assessment of financial stability is a critical input into the board ’ s processes for adjusting the supervisory scenarios used in the stress test and the setting of the countercyclical capital buffer — the two tools that permit the board to respond to vulnerabilities that build over time. the supervisory stress test is intended to ensure that large banking institutions will be able to continue to function normally even under severely adverse macroeconomic conditions. it also assesses the resilience of the largest trading firms to risks of a large disturbance to global financial markets and the failure of the firms ’ largest counterparty. these components reflect some of the key linkages through which the distress or failure of one firm could affect others, 3 / 7 bis central bankers'speeches including direct credit losses as well as the severe financial disruptions that would be expected to accompany fire sales and an increase in risk aversion. by design, the fed ’ s stress test is intended to incorporate some elements to make the tests more stringent when the economy and financial markets are heating up. these countercyclical features are intended to give the stress tests some utility as a macroprudential tool — that is