HONG KONG, Oct. 15 (Xinhua) -- Hong Kong SAR Chief Executive Donald Tsang said Wednesday there was a need for Hong Kong to establish an independent insurance regulatory body.
"This will give the regulatory body more flexibility in operations and staff recruitment, and prepare Hong Kong for the ' risk-based capital regulatory regime' to be adopted by the international community," Tsang said while delivering his annual policy address.
A government-commissioned consultancy was expected to be completed this year on the establishment of the independent Insurance Authority, as compared to the current Office of the Commissioner for Insurance, a governmental branch, Tsang said.
The Hong Kong Special Administrative Region (HKSAR) will then assess the recommendations thereof and prepare the proposals for consultation, he said.
Tsang said the strategy of enhancing Hong Kong's status as an international financial center was "well-considered" and that HongKong will look for opportunity amidst the financial tsunami and tap into the emerging markets to move ahead.
"We can rise above all challenges and emerge stronger," he said.
In terms of finance, Tsang said local authorities have remained vigilant since the onset of the global financial crisis more than a year ago and have tightened their regulation of the banking sector, the stock market and the insurance industry.
The Office of the Commissioner for Insurance is now exploring with the federation of insurers feasible options for establishing policyholders' protection funds, he said.
The Hong Kong Monetary Authority (HKMA), and the Securities and Futures Commission (SFC) were looking into mis-selling complaints on the structured product Minibonds issued by the investment bank Lehman Brothers, he said.
Some investors in Hong Kong suffered losses from their investments in Lehman Minibonds and later lodged mis-selling complaints and staged public protests.
Tsang said in his policy address that Hong Kong, like other members of the global community, faced increased challenges in the current era of globalization, and that the challenges, both economic and others, called for stronger government leadership.
The government should be prepared to step in "in a timely and decisive manner" when the market fails. While continuing to uphold the concept of "Big Market, Small Government," the HKSAR government will implement major planned infrastructure projects and development strategies to reinforce Hong Kong's role as a financial hub, he said.
Hong Kong pledged full protection of all bank deposits until 2010 and announced the plan for a new system for local licensed banks to access additional capital.
The regulatory bodies will examine how to strengthen the regulatory regime and enhance investor protection and education.
The HKMA will strengthen the supervisory framework for liquidity risk management for authorized institutions, revise the capital adequacy ratio methodology in accordance with international standards, strengthen stress tests, capital planning and management of off-balance sheet exposures, and encourage a more complete disclosure of risks.
The SFC has stepped up stress tests on brokers in unfavorable conditions and will tighten regulation of fund managers, among others, he said.
