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HK banking system in strong shape: Monetary authority chief

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HONG KONG : Hong Kong's banking system is in strong shape and the dollar peg does not need to change, the Hong Kong Monetary Authority (HKMA) said yesterday, dismissing rumours that months of protests have undermined the city's financial stability.

Hong Kong slid into recession for the first time in a decade in the third quarter amid protests against what is seen as Beijing's tightening grip on the financial centre.

HKMA Chief Executive Eddie Yue said the Authority had the commitment and ample resources to maintain the city's monetary and financial stability and there was no need to change the peg of the Hong Kong dollar to the US dollar.

"Hong Kong dollar has been stable, the Linked Exchange Rate System will not and does not need to change," Mr Yue said during a presentation at the Legislative Council of Hong Kong, or LegCo.

He urged the public not to listen to rumours aimed at spreading unease.

"Hong Kong will not implement capital and foreign exchange control," Mr Yue said, reiterating there has been no noticeable fund outflows from the Hong Kong banking system during the quarter.

Hong Kong's Exchange Fund, which is used to back the Hong Kong dollar, posted a 55 per cent drop in third quarter investment income from the previous quarter.

The HKMA is the key manager of the Exchange Fund, which is under the control of the financial secretary and invests in equities, bonds, foreign exchange and other securities and assets.

The Exchange Fund posted an investment income of HK$20.2 billion (S$3.5 billion) compared with an investment gain of HK$9.5 billion in the year earlier period. - REUTERS