OPINION> Liang Hongfu
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OPINION> Liang Hongfu
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Yam leaves behind much to ponder
By Hong Liang (China Daily)
Updated: 2009-05-26 09:21 The retirement of Hong Kong monetary chief Joseph Yam this October should open the way for the separation of the authority's supervisory functions from the central bank.
Many financial experts have contended that the supervisory role should be entrusted to a government agency. This would allow the Monetary Authority (central bank) to stay above the secular concerns, which are the bureaucracy's prerogative; and, concentrate on the ecclesiastical duties of defending the Hong Kong dollar and promoting Hong Kong as an international financial center. Yam, who has been chief executive since the Monetary Authority was set up in April 1993, is known to have scoffed at talks of the split. Indeed, the Monetary Authority was born of a merger of the Office of the Exchange Fund, which manages Hong Kong's reserves, with the Office of the Commissioner of Banking, a watchdog agency answering to the Finance Secretary. The issue of spinning off the bank's supervisory function from the Monetary Authority has again been brought to the fore by the Lehman's debacle, which flared up when hundreds of investors complained of big losses from debt instruments issued by the now-defunct US investment bank. The controversy has focused attention on the alleged oversight of the Monetary Authority, arising from a possible lack of coordination with the Securities and Futures Commission, which supervises the securities market. Critics charged that the incident has shown up the Monetary Authority's ill-fitting supervisory role. They contended that if a commission directly under the FS was in charge of bank supervision, it would have a better chance of clarifying the gray area of responsibility with the SFC to ensure timely intervention into the sale of Lehman's securities. Moreover, the Monetary Authority's response to questions about its responsibilities in the Lehman affair was widely seen as officious and unsympathetic. Although Yam's reputation as a central banker has remained untarnished, the Authority's capability in handling issues that demand political skill has come under scrutiny.
To perform its function as Hong Kong's central bank, the Authority should be apolitical. Yam has won the respect of bankers and other financial intermediaries in Hong Kong and abroad for his insightful understanding of finance in general, and the financial system of Hong Kong in particular. He may sometimes come across as being aloof. But he is always lucid and to the point, as evident in his columns in Viewpoint, published on the Monetary Authority's website. Yam will be remembered mainly for the perfection of the pegged exchange rate system that maintains currency stability essential to Hong Kong's development as an international financial center. From his writings, we can learn more of the complexity of balancing numerous variables to keep the currency link intact. During his long tenure, Yam has devoted much of the Monetary Authority's resources to promoting closer financial links with the mainland. He was keen on encouraging the use of Hong Kong as the testing ground of mainland financial reform. The establishment of Hong Kong as an offshore renminbi center has been known to be one of Yam's pet projects. These are all pressing tasks facing his successor. The global financial crisis has thrown up challenges to the pegged exchange rate system, and the rapid progress in financial reform on the mainland presents new opportunities for Hong Kong. It may make more sense for the Monetary Authority to concentrate its resources on such tasks and transfer its bank supervisory duties to a resurrected banking commissioner within the sysyem. E-mail: jamesleung@chinadaily.com.cn |
