to 2017. unlike monetary policies, there has been far limited literature on how macroprudential measures should be calibrated with respect to changes in asset price levels. the complex dynamics underlying the property market in hong kong has made it very difficult, if at all possible, to develop an ex ante framework governing how the hkma should operate its macroprudential policies. so, what we have done is to tread extremely carefully in each round of adjustment. the hkma has established a cross - departmental committee to regularly review whether the prevailing macroprudential measures would need to be adjusted, taking into account a host of factors including the property price trend, transaction volumes, domestic economic fundamentals and the external environment. the committee is chaired by the chief executive of the hkma and comprises members coming from multiple functions including monetary management, banking supervision, research and macro surveillance. 1 / 3 bis central bankers'speeches 6. some commentators have criticised the hkma ’ s macroprudential measures as being ineffective because they have not been able to arrest the rising trend of property prices. this is a misunderstanding of the objective of the hkma ’ s macroprudential measures. the objective of the hkma ’ s measures is not to tame property prices. instead, they are aimed at strengthening the risk management of banks and thus safeguarding long - term banking stability. in this regard, it is worth noting that the average ltv ratio of new residential mortgage loans has been consistently lower than 60 % while the average debt servicing ratio of new mortgages has been consistently lower than 40 %, suggesting that the banking system has built in buffer to safeguard its resilience. 7. competition dynamics : mortgage products in hong kong are homogeneous, in the sense that from the mortgagor ’ s perspective it makes little difference which bank is offering the mortgage facility. there is therefore a strong tendency for banks to compete for market share by lowering their underwriting standards. with the macroprudential measures in place, however, banks can compete for mortgage business only in terms of pricing ( e. g. mortgage rate ). against a backdrop of rising property prices and a consistently low delinquency rate of mortgage loans, many banks tried to outcompete their peers by pushing down the mortgage rate to record low levels. we were concerned that the low mortgage rates banks charge might not be adequate to cover the potential credit loss if property prices were to correct sharply in the future. the hkma has

year since 2005 ; this is substantially higher than the yield available on other major government bond markets ( right - hand side of slide 5 ). in addition to these financial market advantages, china has strong economic fundamentals. at 40 %, china ’ s government debt ratio is much lower than that of many advanced economies. 6 furthermore, the credit quality of chinese central government bonds is high compared to that of other emerging economies, as is reflected in the ratings. foreign investors still enjoy only very limited access to the onshore chinese bond market, however, as the renminbi is not freely convertible and capital flows are still subject to controls. notwithstanding this, the chinese government has been working towards a gradual opening - up of its domestic capital market for several years now. as part of this, china ’ s central bank, the people ’ s bank of china ( pbc ), launched a so - called interbank market programme in 2010, enabling central banks, sovereign wealth funds and insurance companies to request an investment quota for the onshore chinese interbank bond market from the pbc. provided they do not exceed this quota, these entities may invest freely in the ( onshore ) chinese government bond market. more than 20 central banks – including those of france, austria, japan, australia and singapore – have now received a renminbi investment quota. in july this year, the snb signed a renminbi investment quota agreement with the pbc. the snb ’ s investment quota amounts to cny 15 billion ( in excess of chf 2 billion ). while this quota represents a very swiss national bank. 2013. 106th annual report. measured against a standard market index. imf. 2014. fiscal monitor october 2014. includes central and local government debt as well as governmentbacked debt. bis central bankers ’ speeches small proportion of our foreign exchange reserves, it allows the snb to gather some experience of this market. we intend to make use of this quota in the foreseeable future. according to the agreement, the snb is authorised to exchange currency at the pbc for renminbi up to a maximum amount defined in the quota ( slide 6 ). as in all global capital markets, bonds are traded overthe - counter ( otc ), in other words they are traded off - market via local investment banks or the pcb ’ s bureau in shanghai. approximately 90 % of all bonds are traded on the interbank bond market, and the remaining 10 % are