consultancy report published a year or so ago which are still being progressed. for example, later this year we will consider whether there should be some further relaxation of the restriction on the opening of branches by foreign banks which have entered the market since 1978. we also plan to review whether the three - tier system of authorisation might be reduced to two tiers, although we do not plan to visit this issue until next year – i. e. 2002 - and have quite an open mind on this. this is rather later than we originally intended. but it reflects the fact that we believe that the present system is working reasonably well and that there is no pressing need to change. we are also heavily preoccupied with deposit insurance and the outcome of that exercise may influence the way in which the three tier structure is modified – most obviously, whether the deposit threshold for dtcs should continue to be set at $ 100, 000. 8. also on the back burner for the time being is consideration of whether there should be any change to the minimum paid - up capital requirements for locally - incorporated ais. this obviously is tied in to some extent with the reform of the three - tier structure, as if we did amalgamate the rlbs and dtcs into a single class we would have to decide what the minimum paid - up capital requirement for the class should be. this is something we will have to consider in due course, but we are of course well aware that a higher requirement would have implications for some of the smaller dtcs, and we will certainly have regard to this. aside from any change related to the reform of the three - tier structure, we don ’ t at present have any other plans in relation to the minimum capital requirements, although at some point we may want to consider updating them in line with inflation. 9. on the third initiative i mentioned, the credit reference agency, some of you may know that we have established a working group to take this initiative further. the consultation we conducted indicated that there was quite widespead support for such an agency, although having said that it is fair to say that there was quite a diversity of opinion on various aspects. the working group will investigate this further and try to arrive at a recommended way forward. but we hope that something can be done in this area, as most seem to agree that such an agency would be beneficial. 10. so that brings me to the end of what i see as the three main initiatives, but let

prudence, and a great credit to hong kong's banking system. we also seem to have achieved a good balance in the relationship between the supervisor and the banking system. an excellent example of how that balance has contributed to banking stability is the 70 % loan - to - value policy for residential mortgage lending by banks. this policy, now a cornerstone of our prudential arrangements, pre - dates even the foundation of the hkma and evolved out of a productive dialogue between hkab and the supervisor. it has survived strong political pressure for relaxation and market pressure for innovative credit risk transfer through securitisation. the policy – now nearly two decades old – fits in well with the macroprudential approach which, particularly in the light of the recent crisis, supervisors in other jurisdictions now consider to be essential to banking stability. the fact that no such policy existed in the advanced financial systems is remarkable enough. but what is more remarkable is the level of initiative of the hong kong banking sector itself in seeing the importance of systemic stability and giving it precedence over the profitability of individual institutions. we might therefore observe, in the light of this and of our experience over the past year, that hong kong has got it broadly right in the relationship between the supervisor and the banking system. however, this should not lead us to the complacent conclusion that there is nothing much that needs changing. and indeed, no such conclusion is in our minds. both the carse report and the recent reports to the financial secretary on the sale of lehmanrelated products see room for development and improvement in the way we carry out our work. quite apart from our own hong kong - specific initiatives, there are movements for reform at the international level, resulting from a very different experience in the more developed economies, which we cannot ignore. this point brings me to my second observation : the need to move with the times. the past year has seen a plethora of ideas and proposals for reforming financial regulations, and interventions by government that were unprecedented in their nature and scale. even in economies less deeply affected by the latest crisis, including hong kong, it has been necessary to deepen government involvement, for example in more extensive deposit guarantees or in more intense supervision of banks'risk management – although it is gratifying that so many of the tools that we have been able to rely on, including the apparatus and contingency arrangements for ensuring liquidity, have been developed in a pre - emptive rather than