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

financial secretary in the 2013 – 14 budget to provide more choices to market participants in terms of the legal form of funds. this would be a major step to attract more funds to domicile in hong kong ; and ( e ) last but not least, the hkma, in close collaboration with the securities and futures commission ( sfc ) and the private banking industry, has undertaken a series of measures to promote the development of hong kong as the premier private wealth management hub in bis central bankers ’ speeches the region. the hkma issued guidance to private banks in june 2012 to facilitate the adoption of a portfolio based approach in assessing the suitability of investment recommendations so that private banks can be more flexible in serving customer needs without compromising investor protection. 7. in addition to lobbying and advising the hksar government on the abovementioned measures that are crucial to hong kong ’ s development as a wealth and asset management centre, the hkma has seconded staff to provide technical support to the financial services branch during the policy formulation as well as the legislative process. 8. ladies and gentlemen, while we have done a lot in the past few years to build and reinforce hong kong ’ s platform as the wealth and asset management hub, we fully appreciate that such work is a never ending task as most financial centres in the region, including those in mainland china, all harbour the understandable aspirations to become an international financial centre. outreaching to supplement platform building 9. now let me turn to the second “ building block ” of soft powers, which is “ reaching out ”. i am sure most of you would agree with me that the platform building work must be supplemented by appropriate “ outreaching ” efforts. this is similar to the situation in which a company, having created a very superior and competitive product, needs to do a lot of marketing and advertising in order to increase customer awareness and market share. for this reason, the hkma has over the past few years undertaken a series of outreaching and marketing programmes with special emphasis on hong kong as the asian hub for wealth and asset management businesses. 10. hong kong is already a hub for private wealth and asset management. nearly 80 of the top 100 global money managers are in hong kong. fifteen private banks have opened for business since 2009, bringing the total to 45 banks offering private banking services to their clients today. for the asset management business as a whole, the combined fund management assets hit a record high of us $ 1. 6 trillion in 2012, with