success in the mpf business also requires an established customer base, good distribution networks and strong brand image. all this means that the mpf is not a business where small players can hope to be successful on a stand - alone basis. even for the large companies that have captured the lion's share of the business, the start - up costs and the ongoing expenses mean that it will probably take a few years for them to break even and still longer to achieve a reasonable return of capital. however, this should not blind us to the strategic importance of the mpf for the banking and financial services industry in hong kong. this is why it was vital for the smaller banks to pool their resources in the bank consortium trust. this has enabled them to establish a credible vehicle and win a market share that is probably larger than the shareholders could have achieved if they had acted independently. the strategic appeal of the mpf lies not simply in the long - term profit opportunities that it offers directly. it is also that it will help to build a relationship with both employers and their employees that can be used to generate cross - selling opportunities. this will be aided by the fact that the relationship established via the mpf is likely to be a sticky one, and companies are unlikely to shift to another scheme unless there are good reasons to do so. this does not mean, however, that mpf providers can afford to provide a bad service. if they do, they will destroy goodwill and make it more difficult to sell other products. the cross - selling opportunities provided by the mpf are not theoretical. there are already signs that it is making an impact on sales of other funds to individuals. as your association recently announced, the fund penetration rate in hong kong has risen from 7. 8 % to 10 % in a year. this is a creditable performance in view of the weakness in the stock market. one of the reasons for the increasing willingness to invest in funds is undoubtedly the low return now offered by bank deposits. however, it also appears that the marketing of the mpf over the last year has helped by focussing employees'attention on the attractions of funds for long - term savings purposes and on the need to plan for retirement. the role of the regulators i have talked so far about the involvement of the banks in mpf business. in practice, however, the role played by banks themselves is mainly to act as intermediaries, selling and advising on mpf schemes. the various mpf services – trustee

##imr's activities and to alert the board of directors if shortcomings become apparent. while the relationship between the hkimr and the hkma remains close, the hkimr does enjoy independence in research matters. one consequence of this is that the views expressed in its different publications do not necessarily reflect those of the hkma. one of the distinguished members of the hkimr's council of advisors is our first speaker today, charles goodhart, and it is my great pleasure to introduce him. it was very much his visit to hong kong that gave the hkimr the idea of organising this workshop. as you all know, charles is one of the world's foremost monetary economists and an expert on central banking issues. but what some of you may know is that he has had a very long involvement in, and influence on, monetary issues here in hong kong. this began almost exactly twenty years ago when hong kong, suffering from a crisis of confidence in its political future, and without any effective form of monetary control, was on the brink of a financial meltdown. the exchange rate was depreciating sharply and charles was brought in from the bank of england to advise us on how hong kong could be rescued. he gave valuable advice on a proposal to return to a fixed exchange rate system through the currency board arrangement of linking the hong kong dollar to the us dollar. as you all know, that exchange rate link was subsequently established, in october 1983, and it is still in operation now. it commands a high degree of confidence and credibility. it has served hong kong extremely well in the past twenty years. in his advice, charles also covered other strategic issues of central banking for hong kong. as the only remaining person in the public sector continuously involved in this area of work from then until now, i can say with some authority that the views of charles have exerted much influence on the development of the monetary system of hong kong. i do not know whether you remember, charles, your piece of advice to the then financial secretary, the late sir john bremridge, written on 6 october 1983. i have kept a copy of it, and i often refer to it for inspiration in the past twenty years. fortunately for me, but not perhaps for others, the advice is so highly classified that it will probably never see the light of day. but it should be all right for me to quote from your covering letter to sir john, where you said : “ i