also recognise a broader responsibility to the community of hong kong, and a duty to promote an understanding of our role and objectives, and to keep ourselves informed of community concerns and open to public debate. to this end, the hkma pursues a policy of transparency and accessibility. this policy has two main objectives : to keep the financial industry and the general public as fully informed of the hkma ’ s work as possible ; and to ensure that the hkma is in touch with, and responsive to, the community that it serves. we have done a great deal over the past year to advance this policy. this applies not just to technical matters, such as the greatly increased transparency of the currency board system or the daily publication, since november, of the size and composition of the monetary base and the virtually real - time publication of the aggregate balance of the banking system. it also applies to the information we issue for general public consumption, whether in print, through the press, on the internet, or in our programmes of educational briefings and seminars. of course, considerations of market sensitivity, commercial confidentiality, and statutory restrictions on disclosure of confidential information place some limits on the amount of material we can make public. given the increasing transparency and the extremely limited discretion over the currency board arrangements, which draws its credibility from a strict rule - based system, a certain constructive ambiguity is also necessary if we are to have the flexibility to deal decisively with sudden crises. within these limits, we are committed to developing our policy of transparency, and to increasing the quality and comprehensibility, and not just the quantity, of the materials we put out for public consumption. the challenges of this year we see it as one of our challenges to seek to maintain public interest in our work, even though it is possible that some of the controversies and concerns that sustained that interest in 1998 will fade away as economic recovery moves closer. this brings me to the prospects for the remainder of this year and beyond. i leave the predictions and forecasts to others in the government entrusted with this task. but i think it appropriate to say something here about the monetary environment. recent months have witnessed the return to a more stable monetary environment in hong kong. speculative pressures on our currency have moderated sharply, allowing a significant decline in interest rates from the peaks last year. as you know, under the linked exchange rate system, our interest rates are closely tied to those in the united states in normal circumstances. in last year ’ s exceptional

’ s banking system, quite naturally, came under severe pressure, though it has handled the downward adjustment in asset prices and the volatilities brought on by the financial crisis with remarkable success. a much more disturbing feature of the larger crisis has been the succession of opportunistic attacks on the hong kong dollar and on hong kong ’ s financial markets. these attacks increased the pains of recession by pushing up interest rates and by corroding confidence in our financial system, both locally and overseas. they reached a climax in the sophisticated assault of early august, which mobilised massive resources in an attempt to play off the currency board system against the stock and futures markets. this attack was unprecedented in scale and organisation. it posed a grave threat to the stability and integrity of our whole financial system. decisive, albeit controversial, action by the hong kong sar government ensured that this threat was averted. in combination with other factors, this action helped to ensure stability in our markets for the remainder of the year and beyond. the hkma ’ s role in the august operation is well known to members. for my part, i am fully convinced that what we did was necessary and right for hong kong, and that it delivered our financial system from the brink of a profound and very dangerous crisis. the portfolio of shares acquired by the government as a result of operations has been placed under the management of efil, which will draw up plans for disposing the majority of them in a gradual and orderly manner. but so much has been said about this subject that the impression is sometimes given that that is all that the hkma did in 1998. this is a pity, because we have other solid achievements to place on record. among the achievements worth singling out are : • effective supervision of the banking system to ensure stability and soundness during a period of intense regional financial crisis and domestic slowdown. • a growth of 27. 5 % in the accumulated surplus of the exchange fund during the year, or 15 % if the gains from the equity portfolio acquired in august are excluded. • continuing currency stability, within the framework of the linked exchange rate system, against unprecedented speculative attacks, and during a year of currency instability in much of the rest of the region. • substantial improvements to the currency board system, which have made it more resilient, more transparent, and less vulnerable to manipulation than it was before. • increased involvement in regional and global initiatives to promote hong kong as an international financial centre and