The Hong Kong Monetary Authority is Hong Kong's central currency board. It is a government authority founded on 1 April 1993 via the consolidation of "Office of the Exchange Fund" and the "Office of the Commissioner of Banking". The organisation reports directly to the Financial Secretary.
The fund was established and managed originally by the "Currency Ordinance" in 1935. It is now named the "Exchange Fund Ordinance". Under the Exchange Fund Ordinance, the HKMA's primary objective is to ensure the stability of the Hong Kong currency, and the banking system. It is also responsible for promoting the efficiency, integrity and development of the financial system.
Since 1995, the HKMA has entered into a stability pact with central banks in Malaysia, Thailand, Indonesia and Australia to engage in repurchase agreements, which provide liquidity on a two-way basis.
Currency board systemEdit
It is included the Linked Exchange Rate System and noticeable features such as the Aggregate Balance, Certificates of Indebtedness and coins issued and the Outstanding Exchange Fund Bills and Notes.
The Interest Rate Adjustment Mechanism is an automatic system that maintains the stability of the Hong Kong dollar exchange rate. Lately the HKMA has been disclosing the forecast change in the Aggregate Balance attributes to increase the transparency of the Currency Board operation.
In 1995, Nobel Prize winning economist Milton Friedman mistakenly predicted the Hong Kong dollar's demise within two years of the 1997 handover. He also predicted the absorption of the territory's financial reserves of US$43 billion (HK$335.4 billion) by Beijing, which would not be able to bear the subrogation of Hong Kong's monetary policy to the United States.
Banking Stability mainly depends on the "Banking System and Supervision". A "Three-Tier System" was implemented in the 1980s. Institutions are also managed different depending one whether they are categorised as Licensed Banks, Restricted License Bank or Deposit-taking Institutions. Overseas banks may also establish local representative offices in Hong Kong.
The HKMA's is headquartered in the International Finance Centre. It purchased 14 floors in tower 2. The 55th, 56th and the 77th to 88th floors were bought for US$ 480 million in 2001. An exhibition area, currently containing an exhibit of Hong Kong's monetary history, and a library of the Hong Kong Monetary Authority Information Centre occupy the 55th floor. The 88th floor of the tower contains the office of the Chief Executive of the HK Monetary Authority, and is served by an individual lift.