The Hong Kong Monetary Authority (HKMA) is the de facto central bank and the chief regulatory authority for the financial sector in Hong Kong. Established on April 1, 1993, the HKMA operates as an autonomous government authority under the jurisdiction of the Hong Kong Special Administrative Region (HKSAR) government. Its primary goal is to maintain the stability of the Hong Kong dollar and the overall financial system in Hong Kong.
The HKMA has four primary functions:
- Currency stability: The HKMA is responsible for maintaining the stability of the Hong Kong dollar by managing the linked exchange rate system, which pegs the Hong Kong dollar to the United States dollar. This involves managing the foreign exchange reserves, monitoring the foreign exchange market, and implementing appropriate monetary policies.
- Monetary stability: The HKMA ensures the stability of the monetary and financial systems by managing the liquidity of the banking sector, setting interest rates, and monitoring macroeconomic indicators. It also acts as the lender of last resort, providing support to banks in times of financial stress.
- Banking supervision: The HKMA oversees the regulation and supervision of licensed banks, deposit-taking companies, and restricted license banks operating in Hong Kong. It sets prudential standards, conducts regular inspections, and ensures compliance with regulations and international standards, such as those set by the Basel Committee on Banking Supervision.
- Development of financial infrastructure: The HKMA is responsible for developing and maintaining Hong Kong's financial infrastructure, including payment systems, the Central Moneymarkets Unit (CMU) for debt securities clearing, and the provision of settlement services for banks and financial institutions.
Additionally, the HKMA engages in international cooperation with other central banks and financial regulatory bodies, fostering collaboration and sharing of information. It also plays a significant role in promoting Hong Kong as a global financial center by facilitating market development and financial innovation.