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25-611: The system was implemented by the Hong Kong Monetary Authority and operated by Hong Kong Interbank Clearing Limited (HKICL). It was launched for pre-registration on 17 September 2018. Transfers and payments is available since 30 September 2018. Traditional interbank transfers required payment of fees between 50 HKD and 200 HKD, or a waiting time of up to two days before the payment clears. FPS provides an instant, round-the-clock and cheap way of transferring funds. For personal banks accounts, interbank fund transfer through FPS

50-583: A bigger crisis and saved the market". Most stocks acquired during that operation were successively disposed with the creation of a tracker fund, the TraHK . This reduced the portfolio of Hong Kong equities to 5.3% of the reserves in 2003. However, the percentage crept back and had risen above 10% by 2006. In August 1998, as part of its wider remit to protect the currency, the HKMA lent the Thai government US$ 1   billion from

75-442: A combined loss of HKD 180,000 to customers. After the incidents were found, HKMA suspended the top up function of all e-wallets operators until the security issues were fixed. A few days later, it was revealed that more than 10 suspected cases were reported and the loss was surged to HKD 400,000. Hong Kong Monetary Authority The Hong Kong Monetary Authority ( HKMA ) is the central banking institution of Hong Kong . It

100-627: A library of the Hong Kong Monetary Authority Information Centre, occupy the 55th floor. The 88th floor of the tower contains the office of the chief executive of the HKMA, and is served by an individual lift. The Chief Executive is appointed for a five-year term by the Financial Secretary , and is continuously renewable with no term limit. The chief executive is supported by a number of deputy chief executives, shown below in order of appointment. The HKMA hosted

125-740: Is a government authority founded on 1 April 1993 when the Office of the Exchange Fund and the Office of the Commissioner of Banking merged. The organisation reports directly to the Financial Secretary . The exchange fund was established and managed originally by the Currency Ordinance in 1935, now named the Exchange Fund Ordinance. Under the Ordinance, the HKMA's primary objective is to ensure

150-524: Is also host to the 2022 Global Financial Leaders' Investment Summit . Linked exchange rate A linked exchange rate system is a type of exchange rate regime that pegs the exchange rate of one currency to another. It is the exchange rate system implemented in Hong Kong to stabilise the exchange rate between the Hong Kong dollar (HKD) and the United States dollar (USD). The Macao pataca (MOP)

175-451: Is made easier by two factors: the first is the openness of the economy, with an aggregate demand heavily dependent on international trading partners; this reduces the risk of classic liquidity traps . The second factor is the scarce political clout of the trade unions, which makes it easier to trim the nominal salaries during recessionary times. Moreover, the high saving rates and the moral stigma attached to bankruptcy have kept relatively low

200-743: Is normally free of service charges. Participants in the FPS share a common standard for the QR code which allows paying to merchants using a variety of payment methods like bank cards , stored value facilities or direct debit from bank accounts. HKMA has released a tool for merchants to convert QR codes from different payment providers into a single standard QR code. FPS supports payments in Hong Kong dollars (HKD) and Chinese Yuan Renminbi (CNY). After 3 weeks of launching FPS in Hong Kong, there were several cases of fraud reported to Hong Kong Police that involved

225-435: Is over 7 times the amount of money supplied in circulation or about 48% of Hong Kong dollars M3 at the end of April 2016. Since 5 September 1998, the HKMA has provided an explicit convertibility undertaking to all licensed banks in Hong Kong to convert Hong Kong dollars in their clearing accounts into US dollars at the fixed exchange rate of HK$ 7.75 to US$ 1 . Starting from 1 April 1999, the convertibility rate in respect of

250-504: Is similarly linked to the Hong Kong dollar . Unlike a fixed exchange rate system, the government or central bank does not actively interfere in the foreign exchange market by controlling supply and demand of the currency in order to influence the exchange rate. The exchange rate is instead stabilized by an exchange mechanism, whereby the Hong Kong Monetary Authority (HKMA) authorises note-issuing banks to issue new banknotes provided that they deposit an equivalent value of US dollars with

275-431: The 1997 Asian financial crisis , currency speculators sold the Hong Kong dollar heavily and shorted local stocks and Hang Seng Index futures. The government controversially used the exchange fund to acquire HK$ 120   billion ( US$ 15   billion) worth of blue-chip shares in a two-week market intervention, beginning 12 August 1998 with the aim of punishing and deterring currency speculators . The intervention

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300-496: The banknotes ) were sent out by note-issuing banks to peg the domestic currency against the US dollar at an internal fixed rate of HK$ 7.80 = US$ 1. The Hong Kong Monetary Authority (HKMA), Hong Kong's de facto central bank, authorised note-issuing banks to issue banknotes . These banks are required to have the same amount of US dollars to issue banknotes. The HKMA guarantees to exchange US dollars into Hong Kong dollars, or vice versa, at

325-531: The Aggregate Balance attributes to increase the transparency of the Currency Board operation. In 1995, Nobel Prize–winning economist Milton Friedman mistakenly predicted the Hong Kong dollar's demise within two years of the 1997 handover . He also predicted the absorption of the territory's financial reserves of US$ 43   billion ( HK$ 335.4   billion) by Beijing, which would not be able to bear

350-520: The HKMA. The Government, through the HKMA, authorises three commercial banks to issue banknotes: Notes ( HK$ 10 only) are also issued by the HKMA itself because of the continuing demand for small value notes among the public. As a response to the Black Saturday crisis in 1983, the linked exchange rate system was adopted in Hong Kong on October 17, 1983 through the currency board system . The redemption of certificates of indebtedness (for backing

375-493: The banking system and supervision. A three-tier banking system ( 銀行三級發牌制度 ) was implemented in the 1980s. Institutions are also managed differently depending on whether they are categorised as licensed banks, restricted license banks or deposit-taking institutions. Overseas banks may also establish local representative offices in Hong Kong. In 2019, the HKMA began issuing the first batch of virtual bank licenses in Hong Kong; these banks were not required to have physical branches in

400-509: The banking system are important underpinnings of the linked exchange rate system . Since 1995, the HKMA has entered into a stability pact with central banks in Malaysia, Thailand, Indonesia and Australia to engage in repurchase agreements , which provide liquidity on a two-way basis. The Central Moneymarkets Unit (CMU), established in the 1990, provides computerised clearing and settlement facilities for Exchange Fund Bills and Notes. It extended

425-546: The city. It is included the Linked Exchange Rate System and noticeable features such as the Aggregate Balance, Certificates of Indebtedness and coins issued and the Outstanding Exchange Fund Bills and Notes. The Interest Rate Adjustment Mechanism is an automatic system that maintains the stability of the Hong Kong dollar exchange rate. Lately the HKMA has been disclosing the forecast change in

450-600: The fund as part of a $ 17   billion bailout organised by the International Monetary Fund (IMF). The HKMA is headquartered in Tower 2 of the International Finance Centre . It purchased fourteen floors in Tower 2. The 55th, 56th, and the 77th to 88th floors were bought for US$ 480   million in 2001. An exhibition area currently containing an exhibit of Hong Kong's monetary history, along with

475-465: The level of defaults on mortgages even during the deep recessions after the 1997 Asian financial crisis and the SARS epidemic in 2002/2003. Under colonial rule , the HKMA did not place funds with local banks not rated by Moody's Investors Service or Standard & Poor's . Only the three note-issuing banks could receive deposits because they had been rated by "objective international standards". During

500-501: The meeting of the World Bank and IMF in 1997, at an estimated cost of HK$ 485   million. Yam hoped that hosting the event would cement Hong Kong's status as an international financial centre. He added, "The presence of the world's leading finance ministers, central bank governors and top commercial bankers in Hong Kong so soon after the change of sovereignty will help boost international and local confidence in Hong Kong". The HKMA

525-433: The rate of 7.80. When the market rate is below 7.80, the banks will convert US dollars for Hong Kong dollars from the HKMA; Hong Kong dollar supply will increase, and the market rate will climb back to 7.80. The same mechanism also works when the market rate is above 7.80, and the banks will convert Hong Kong dollars for US dollars. The Hong Kong dollar is backed by one of the world's largest foreign exchange reserves , which

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550-617: The service to other Hong Kong dollar debt securities in late 1993. A seamless interface allow the co-existence of the CMU and the newly launched real-time gross settlement (RTGS) inter-bank payment system. This enables end-of-day delivery versus payment (DVP) services as opposed to Non-DVP . In 2018, HKMA developed the infrastructure for the Faster Payment System and launched it in September of that year. Banking stability mainly depends on

575-488: The stability of the Hong Kong currency and the banking system. It is also responsible for promoting the efficiency, integrity and development of the financial system. The HKMA issues banknotes only in the denomination of ten Hong Kong dollars. The role of issuing other banknotes is delegated to the note-issuing banks in the territory, namely The Hongkong and Shanghai Banking Corporation , Standard Chartered Bank and Bank of China . The official reserves of Hong Kong and

600-474: The subrogation of Hong Kong's monetary policy to the United States. As with any monetary system not based on a fiat money (which includes currency boards, currency unions and the traditional gold standard ) it is impossible to use monetary policy to stabilise the business cycle : this means that any macroeconomic adjustment has to be achieved by changes in the prices of assets and labour. In Hong Kong, this

625-480: Was widely criticised as being detrimental to Hong Kong's reputation as one of the world's financial centres. Democratic Party leader Martin Lee Chu-ming criticised the government for becoming "a player, a very key player" instead of being a regulator. Conversely, one speculator said in hindsight that the government's intervention "raised public confidence in the market when it was near total collapse" and "prevented

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