TheStar
HONG KONG: Hong Kong said yesterday it would tighten regulation on fund managers to better protect investors and is considering a protection fund for insurance policy holders in the wake of the global financial crisis.
Chief executive Donald Tsang, in his annual policy address, said the territory would review the code on unit trusts and the disclosure of information by mutual fund distributors to investors.
The government was also considering establishing a protection fund for insurance policyholders and intends to set up an independent insurance authority to promote stability in the insurance industry.
“Risk management has become more important than ever to our financial system,” Tsang said in his speech to legislators, referring to the global financial crisis which he said would have a much bigger impact than the Asian financial crisis a decade ago.
Hong Kong’s financial infrastructure was more robust than 10 years ago, he said.
Thousands of Hong Kong investors, however, recently suffered losses on credit-linked notes, known as mini-bonds, issued by collapsed US investment bank Lehman Brothers. They are seeking compensation from banks that sold the bonds, but the government has said the investors are unlikely to get back all their money.
Guy Ellis, a partner at accountancy PricewaterhouseCoopers, said he welcomed Tsang’s announcement to tighten regulation on mutual fund sales and protect insurance policyholders.
“These are good things to do at this time,” Ellis said. “Whether they will indeed protect investors remains to be seen. We don’t have the details of what he is proposing. But any measures to protect investors against inappropriate products is a concept one would support.”
The Hong Kong Monetary Authority has eased credit conditions for local banks as a result of the global credit crisis. On Tuesday, it also announced it would guarantee all customer bank deposits for two years and set up a fund to provide standby capital to local banks, if necessary. €” Reuters
Tsang said the HKMA would strengthen supervision of liquidity risk management for authorised institutions, and revise the methodology for calculating capital adequacy ratios in accordance with the Bank for International Settlements’ latest guidelines.
The central bank would also strengthen stress tests, capital planning and management of off-balance sheet exposures, he said.
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