LCQ3: Review and Approval of Directors Or Chief Executives of Authorized Institutions (25

Press Release

LCQ3: Review and approval of directors or chief executives of authorized institutions Wednesday, June 25, 200

Following is a question by the Hon Martin Lee and a reply by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, in the Legislative Council today (June 25):

Question:

Regarding the recent replacement of the chief executive of the BOC Hong Kong (Holdings) Limited (BOC Hong Kong), will the Government inform this Council whether it knows:

(a) if the Hong Kong Monetary Authority (HKMA) has an established procedure for vetting and approving banks' applications for replacing their senior management staff; if so, of the details of the procedure and the time required for vetting and approving these applications;

(b) the time taken by HKMA to approve the BOC Hong Kong's application for replacing its chief executive; whether there is any difference between vetting and approving this application and other similar applications; if so, the reasons for that; and

(c) when HKMA was vetting and approving the BOC Hong Kong's application for replacing its chief executive, the reasons for the replacement given to HKMA?

Reply:

Madam President,

(a) According to Section 71 of the Banking Ordinance, the Monetary Authority must be satisfied that the applicants are fit and proper persons for the posts of directors or chief executives of the relevant authorized institutions before he will give his approval. The Hong Kong Monetary Authority (HKMA) follows an established procedure in its review and approval.

1 As explained by the HKMA, upon receiving an application for approval, the HKMA will have regard to the applicant's reputation and character and consider his qualifications in order to determine whether he has the relevant capabilities, knowledge, experience, and soundness of judgement to perform his functions. At the same time, the HKMA will check with relevant local or overseas authorities to see if there exists any negative information about the applicant. This is to ensure that the applicant has neither committed any offence nor has any record of dishonest acts. However the HKMA will not repeat its effort in checking where an earlier check has been made by it with the same local authorities in the past three years in relation to another appointment of the same applicant, or with authorities in relevant overseas jurisdictions within which the applicant has not worked since a previous vetting.

Thus, the specific length of time required in the HKMA's review and approval process depends on the required number of checks with other authorities and how long these authorities take to provide the HKMA with the required information. If, for example, an applicant is already a director of an authorized institution and the appointment for the director's post was made and approved by the HKMA within the past three years, the HKMA will be able to complete the review and approval process of the current application within a very short period. In the past year, there were 36 applications of this kind, of which 7 cases were reviewed and approved within 1 working day; 1 case within 2 working days; 9 cases within 3 working days; and 4 cases within 4 workings days. The applicants of these 21 cases came from different banks, which are headquartered or owned by banks in 9 different jurisdictions. On the other hand, if the applicant has worked overseas but the relevant overseas authorities have not responded to the HKMA's request for information within a reasonable period of time, or further clarification is required with regard to the response from such authorities, the review and approval process can take as long as a few months.

(b) The HKMA must not disclose information of individuals or individual authorized institutions obtained by it in the discharge of its supervisory functions. However as I said earlier, the HKMA may, in certain cases, complete the vetting and approval process of senior management changes in banks within a few days. The time required in the case of BOC Hong Kong's chief executive post was about the same as that required in similar cases. There is also no difference in the principle and procedure being adopted.

(c) As bound by the secrecy provisions under the Banking Ordinance, the HKMA cannot disclose information of individual banks.

Thank you, Madam President.