HK needs to enhance software to retain IFC status

HONG KONG - Hong Kong should enhance its software in order to maintain the competitiveness as an international financial center (IFC), said Chief Executive of Hong Kong Monetary Authority Norman Chan on Friday.

Chan made the remark in a keynote speech at the fifth Treasury Markets Summit, co-hosted by the Hong Kong Monetary Authority and the Treasury Markets Association.

In Chan's view, it was difficult for Hong Kong to become an IFC over the past few decades. As an IFC, it needs to serve not only the domestic customers, but also has to capture financial businesses and money flows.

Chan said that an international financial center also needs to offer consistent and efficient financial services to be competitive.

"In other words, domestic financial centers will need to go through various fierce competitions before a few of them can emerge as successful IFCs", he said.

Chan noted that in the World Economic Forum's Global Competitiveness Index, there are 12 categories of benchmarks to assess the major financial centers' rankings and competitiveness. The items of the assessment relate to fiscal infrastructure such as airport, railroad and optical fibers. However, the hardware is not the deciding factor, what really matters is software, which differentiates top IFCs from others.

Software mentioned by Chan here referred to a wide range of qualities and strengths, including the rule of law, protection of property rights, taxation, ease of doing businesses and so on.

Chan said that Hong Kong has been striving to develop its software in the past decades, and should maintain its competitive edge through enhancing the ability to exercise the power of three Cs -- competence, control, and culture.

Chan said that financial institutions in Hong Kong should keep updated with latest market development and financial innovations in order to maintain technical and professional competence. The control in governance and risk taking is important for the success of financial firms.

As for culture, Chan said that the financial firms can establish certain cultures to make the staff behave well voluntarily instead of through regulations. Also, financial institutions should uphold the right values that protect and serve the interests of customers who make use of Hong Kong's financial services.

Chan believed that a successful financial firm or an IFC must ensure that it can develop and cherish the culture and values that will restrain excessive greed and protect customers' interests, " Only in doing so, that will enable IFC to sustain its position and competitive edge over a long period of time."

Chan called on the financial industry, regulators and policy makers to work together to upgrade the 3Cs, "which is essential to maintain Hong Kong's competitive edge against other IFCs".