Foreign currency reserves at US$258.2 billion

Hong Kong’s foreign currency reserve assets amounted to US$258.2 billion at the end of February 2010, according to the Hong Kong Monetary Authority, compared with US$257.1 billion at end-January 2010.

Including unsettled forward contracts, the foreign currency reserve assets of Hong Kong at the end of February 2010 also stood at US$258.2 billion, compared with US$257.1 billion at end-January 2010.

Hong Kong is the world’s seventh largest holder of foreign currency reserves based on the latest published figures, after mainland China, Japan, Russia, Taiwan, India and Korea.

The total foreign currency reserve assets of US$258.2 billion represent about nine times the currency in circulation, or 56% of Hong Kong dollar M3.

US$6.29 billion surplus recorded in January

The Hong Kong Special Administrative Region Government recorded a US$6.29 billion surplus in January, thereby bringing a net surplus of US$6.14 billion for the 10-month period that ended in January 2010.  Expenditure for the period amounted to US$29.2 billion and revenue was US$35.34 billion.

A government spokesman said that the surplus in January was mainly due to the receipt of land premium, salaries tax and profits tax. Taking into account the projected revenue and expenditure toward the year-end, the revised estimate for the 2009-2010 financial year, as announced in the budget speech on February 24, is a surplus of US$1.76 billion.

Hong Kong’s fiscal reserves stood at US$69.5 billion as at January 31, 2010.

Exchange Fund totals US$282.75 billion

Total assets of the Hong Kong Exchange Fund amounted to US$282.75 billion on January 31, US$6.91 billion higher than at end-December 2009, according to the Hong Kong Monetary Authority.

Foreign currency assets rose US$4.32 billion and Hong Kong dollar assets increased US$2.58 billion.

The rise in foreign currency assets is mainly due to increases in Certificates of Indebtedness and unsettled purchases of securities.  The rise in Hong Kong dollar assets is mainly due to placements received from fiscal reserves, which were partly offset by a decrease in bank borrowings.

The Currency Board Account shows that the monetary base at the end of January 2010 was US$131.06 billion, a US$1.48 billion increase, or 1.2%, from the end of December 2009.  The rise in the monetary base is mainly due to an increase in Certificates of Indebtedness reflecting the seasonal demand for banknotes toward Lunar New Year.

Backing assets grew US$2.01 billion, or 1.5%, to US$140.61 billion.  The increase was attributable mainly to the rise in the monetary base, together with revaluation gains and interest from investments.  Reflecting this, the backing ratio increased from 106.96% at the end of December 2009 to 107.29% at the end of January 2010.

Appointments at Monetary Authority

The Hong Kong Monetary Authority (HKMA) announced that the Financial Secretary, following the advice of the Governance Sub-Committee of the Exchange Fund Advisory Committee, has approved the appointment of Raymond Li, an existing Executive Director, as Director-General, Enforcement, and the new appointments of Meena Datwani, Carmen Chu, and Howard Lee as Executive Directors. The appointments of Mr. Li, Ms. Datwani and Ms. Chu will take effect on April 1; Mr. Lee’s appointment will take effect on April 26.

With effect from April 1, the three banking departments of the HKMA will be reorganized into four departments by a reshuffling of functions to manage a more complex and demanding workload of the HKMA’s banking supervision and development work.

The new Enforcement Department will take over responsibility from the Banking Development Department for securities enforcement and complaints-handling functions. This arrangement will ensure full-time attention at the senior level to the handling of the disciplinary processes arising from the completion of the investigation into most of the Lehman-related complaints, and to the investigation and processing of non-Lehman-related complaints.

The original Banking Development Department will be renamed the Banking Conduct Department, and will, in addition to its existing responsibilities for deposit protection, payment systems oversight, licensing and settlement, take over from the Banking Supervision Department and the Banking Policy Department all supervisory and development functions relating to the business conduct of authorized institutions.

Mr. Li is currently Executive Director of the Banking Development Department responsible for the Deposit Protection Scheme, licensing matters, enforcement on securities activities, and oversight of clearing and settlement systems.

Ms. Datwani will take up the position of Executive Director of the Banking Conduct Department. As a solicitor serving in the Hong Kong Government, Ms. Datwani joined the HKMA in 1995 as Senior Counsel, providing legal advice on a variety of issues. She was promoted to Deputy General Counsel in 1999 and has been closely involved in the legal side of banking issues throughout the years.

Ms. Chu, who was appointed Executive Director of the External Department, will be responsible for multilateral agencies and central bank cooperation, renminbi banking business, financial market integration issues, and Mainland economic and financial market research. She joined the HKMA in 1994 as a Manager Trainee, and has had different duties in the HKMA, including research, monetary operations, and administrative support to a senior executive.  She was seconded to the World Bank Office in Beijing from 1998 to 1999. Since then, she has mainly been with the External Department, where she was promoted to Senior Manager in 2000 and to Division Head in 2006.

Mr. Lee will take over from Christopher Munn as Executive Director of the Corporate Services Department upon Mr. Munn’s resignation on April 26. He will be responsible for corporate development, human resources, administration, finance, and information technology. Mr. Lee was an Administrative Officer Staff Grade B in the civil service and had held senior positions with responsibilities for policy formulation and administration before he joined the HKMA in August 2009 as Division Head.

Commenting on Mr. Munn’s departure, the Chief Executive of the HKMA, Norman Chan, said that Mr. Munn had made important contributions to developing the HKMA’s corporate support functions in his nearly 12 years of service. “We shall all miss him. We wish him the very best in his future endeavors.”