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Capacity Building in the Hong Kong Banking Industry

In fulfilling a key function of maintaining Hong Kong’s status as an international financial centre, the Hong Kong Monetary Authority devotes substantial efforts to advancing the financial infrastructure in Hong Kong. With the growing emphasis globally on effective corporate governance, the Hong Kong Monetary Authority has recently adopted a three-pronged approach to improve soft infrastructure development and capacity building in the banking sector. The efforts are aimed at promoting stakeholders’ awareness and adoption of practices that support sustainable growth and improve overall industry professionalism. This paper introduces the initiatives spearheaded by the Hong Kong Monetary Authority targeted at different segments of the banking community, namely bank directors, banking practitioners and consumers.


To promote capacity building in the banking sector, the Hong Kong Monetary Authority (HKMA) has launched several initiatives on director empowerment, enhanced competency framework (ECF) and consumer education. The capacity-building efforts aim to raise the level of governance of authorized institutions (AIs) by empowering their directors, establish a competency framework of banking practitioners to help enlarge the talent pool and improve the professional competence in the banking industry, and reduce potential complaints made by consumers through enhancing their understanding about the banking services they use.

Raising Standards of Governance at Board Level

The financial crisis that started to unfold in 2008 and wreaked havoc across global markets exposed the governance weaknesses at financial institutions and their failure to understand the risks they were taking. Greater emphasis has since been put on the role of the board and, in particular, the role of Independent Non-Executive Directors (INEDs). This includes what is expected of them, and the knowledge, expertise and personal qualities they must possess to effectively discharge their duties. Against this backdrop, the HKMA has taken steps to help ensure directors of locally incorporated AIs are fit and proper to perform an effective leadership role in governance.

Board practices and the role of INEDs

The HKMA commissioned a small group of experts with wide-ranging knowledge and experience in corporate governance to undertake a study and make recommendations for empowering and supporting INEDs. The group’s recommendations covered six areas: (i) composition of the board and its committees; (ii) roles, qualities and background, and time commitment of INEDs; (iii) independence and tenure; (iv) remuneration; (v) board practices in relation to INEDs; and (vi) training and development requirements for INEDs. These recommendations were put forward for consultation with the banking industry and other relevant stakeholders.

Responses were received from the Hong Kong Association of Banks (HKAB), the DTC Association, other stakeholding institutions and individuals serving as INEDs of AIs. The responses generally supported the proposed measures to strengthen the role of INEDs in the local banking industry. Specifically, there was broad support for providing INEDs with continuous and timely training, as well as channels to keep them up to date with the latest banking developments and regulatory initiatives. The HKMA is currently analysing the responses with a view to issuing guidance to the industry.

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Content provided by Hong Kong Monetary Authority
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