Official Record of Proceedings
Total Page:16
File Type:pdf, Size:1020Kb
LEGISLATIVE COUNCIL ─ 9 May 2012 9165 OFFICIAL RECORD OF PROCEEDINGS Wednesday, 9 May 2012 The Council met at Eleven o'clock MEMBERS PRESENT: THE PRESIDENT THE HONOURABLE JASPER TSANG YOK-SING, G.B.S., J.P. THE HONOURABLE ALBERT HO CHUN-YAN IR DR THE HONOURABLE RAYMOND HO CHUNG-TAI, S.B.S., S.B.ST.J., J.P. THE HONOURABLE LEE CHEUK-YAN DR THE HONOURABLE DAVID LI KWOK-PO, G.B.M., G.B.S., J.P. THE HONOURABLE FRED LI WAH-MING, S.B.S., J.P. DR THE HONOURABLE MARGARET NG THE HONOURABLE JAMES TO KUN-SUN THE HONOURABLE CHEUNG MAN-KWONG THE HONOURABLE CHAN KAM-LAM, S.B.S., J.P. THE HONOURABLE MRS SOPHIE LEUNG LAU YAU-FUN, G.B.S., J.P. THE HONOURABLE LEUNG YIU-CHUNG DR THE HONOURABLE PHILIP WONG YU-HONG, G.B.S. 9166 LEGISLATIVE COUNCIL ─ 9 May 2012 THE HONOURABLE WONG YUNG-KAN, S.B.S., J.P. THE HONOURABLE LAU KONG-WAH, J.P. THE HONOURABLE LAU WONG-FAT, G.B.M., G.B.S., J.P. THE HONOURABLE MIRIAM LAU KIN-YEE, G.B.S., J.P. THE HONOURABLE EMILY LAU WAI-HING, J.P. THE HONOURABLE ANDREW CHENG KAR-FOO THE HONOURABLE TAM YIU-CHUNG, G.B.S., J.P. THE HONOURABLE ABRAHAM SHEK LAI-HIM, S.B.S., J.P. THE HONOURABLE LI FUNG-YING, S.B.S., J.P. THE HONOURABLE FREDERICK FUNG KIN-KEE, S.B.S., J.P. THE HONOURABLE AUDREY EU YUET-MEE, S.C., J.P. THE HONOURABLE VINCENT FANG KANG, S.B.S., J.P. THE HONOURABLE WONG KWOK-HING, M.H. THE HONOURABLE LEE WING-TAT DR THE HONOURABLE JOSEPH LEE KOK-LONG, S.B.S., J.P. THE HONOURABLE JEFFREY LAM KIN-FUNG, G.B.S., J.P. THE HONOURABLE ANDREW LEUNG KWAN-YUEN, G.B.S., J.P. THE HONOURABLE CHEUNG HOK-MING, G.B.S., J.P. THE HONOURABLE WONG TING-KWONG, B.B.S., J.P. THE HONOURABLE RONNY TONG KA-WAH, S.C. LEGISLATIVE COUNCIL ─ 9 May 2012 9167 THE HONOURABLE CHIM PUI-CHUNG PROF THE HONOURABLE PATRICK LAU SAU-SHING, S.B.S., J.P. THE HONOURABLE KAM NAI-WAI, M.H. THE HONOURABLE CYD HO SAU-LAN THE HONOURABLE STARRY LEE WAI-KING, J.P. DR THE HONOURABLE LAM TAI-FAI, B.B.S., J.P. THE HONOURABLE CHAN HAK-KAN THE HONOURABLE PAUL CHAN MO-PO, M.H., J.P. THE HONOURABLE CHAN KIN-POR, J.P. DR THE HONOURABLE PRISCILLA LEUNG MEI-FUN, J.P. DR THE HONOURABLE LEUNG KA-LAU THE HONOURABLE CHEUNG KWOK-CHE THE HONOURABLE WONG SING-CHI THE HONOURABLE WONG KWOK-KIN, B.B.S. THE HONOURABLE IP WAI-MING, M.H. THE HONOURABLE IP KWOK-HIM, G.B.S., J.P. DR THE HONOURABLE PAN PEY-CHYOU THE HONOURABLE PAUL TSE WAI-CHUN, J.P. DR THE HONOURABLE SAMSON TAM WAI-HO, J.P. 9168 LEGISLATIVE COUNCIL ─ 9 May 2012 THE HONOURABLE ALAN LEONG KAH-KIT, S.C. THE HONOURABLE LEUNG KWOK-HUNG THE HONOURABLE TANYA CHAN THE HONOURABLE ALBERT CHAN WAI-YIP THE HONOURABLE WONG YUK-MAN MEMBERS ABSENT: THE HONOURABLE TIMOTHY FOK TSUN-TING, G.B.S., J.P. THE HONOURABLE TOMMY CHEUNG YU-YAN, S.B.S., J.P. THE HONOURABLE MRS REGINA IP LAU SUK-YEE, G.B.S., J.P. PUBLIC OFFICERS ATTENDING: THE HONOURABLE MICHAEL SUEN MING-YEUNG, G.B.S., J.P. SECRETARY FOR EDUCATION DR THE HONOURABLE YORK CHOW YAT-NGOK, G.B.S., J.P. SECRETARY FOR FOOD AND HEALTH THE HONOURABLE DENISE YUE CHUNG-YEE, G.B.S., J.P. SECRETARY FOR THE CIVIL SERVICE PROF THE HONOURABLE K C CHAN, S.B.S., J.P. SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY THE HONOURABLE GREGORY SO KAM-LEUNG, J.P. SECRETARY FOR COMMERCE AND ECONOMIC DEVELOPMENT LEGISLATIVE COUNCIL ─ 9 May 2012 9169 THE HONOURABLE RAYMOND TAM CHI-YUEN, J.P. SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS MISS ADELINE WONG CHING-MAN, J.P. UNDER SECRETARY FOR CONSTITUTIONAL AND MAINLAND AFFAIRS CLERKS IN ATTENDANCE: MS PAULINE NG MAN-WAH, SECRETARY GENERAL MR ANDY LAU KWOK-CHEONG, ASSISTANT SECRETARY GENERAL MRS JUSTINA LAM CHENG BO-LING, ASSISTANT SECRETARY GENERAL MRS PERCY MA, ASSISTANT SECRETARY GENERAL 9170 LEGISLATIVE COUNCIL ─ 9 May 2012 TABLING OF PAPERS The following papers were laid on the table under Rule 21(2) of the Rules of Procedure: Subsidiary Legislation/Instruments L.N. No. Pesticide Residues in Food Regulation.............................. 73/2012 Building (Minor Works) (Amendment) Regulation 2012..... 74/2012 Lifts and Escalators (General) Regulation......................... 75/2012 Lifts and Escalators (Fees) Regulation .............................. 76/2012 Road Traffic (Registration and Licensing of Vehicles) (Amendment) Regulation 2012.............................. 77/2012 Road Traffic (Parking) (Amendment) Regulation 2012.... 78/2012 Road Traffic (Expressway) (Amendment) Regulation 2012.................................................................... 79/2012 Legislation Publication (Revision) Order 2012 ................. 80/2012 Securities and Futures (Futures Contracts) Notice 2012 ... 81/2012 Buildings (Amendment) Ordinance 2011 (Commencement) Notice 2012............................................................ 82/2012 Building (Inspection and Repair) Regulation (Commencement) Notice ....................................... 83/2012 Building (Minor Works) (Amendment) Regulation 2011 (Commencement) Notice ....................................... 84/2012 Lifts and Escalators Ordinance (Commencement) Notice 2012........................................................................ 85/2012 Protection of Wages on Insolvency (Amendment) Ordinance 2012 (Commencement) Notice.............................. 86/2012 LEGISLATIVE COUNCIL ─ 9 May 2012 9171 Other Papers Report No. 18/11-12 of the House Committee on Consideration of Subsidiary Legislation and Other Instruments Report of the Bills Committee on Fisheries Protection (Amendment) Bill 2011 Report of the Bills Committee on Electoral Legislation (Miscellaneous Amendments) Bill 2012 ORAL ANSWERS TO QUESTIONS PRESIDENT (in Cantonese): Questions. First question. Volcker Rule 1. DR DAVID LI: President, I have learnt that financial regulators from around the world have raised concerns about the extra-territorial impact of the proposed regulations for implementation of the Volcker Rule (the Rule) in the United States. Specifically, concerns have been expressed about the implications for non-United States banks operating a subsidiary in the United States, the special exemptions offered to the United States government securities but not to the securities of other governments, the restrictions of United States banks will face in participating in foreign exchange swap markets overseas and the controls to be imposed on trades involving United States-domiciled counterparties. In this connection, will the Government inform this Council: (a) of the impact of the proposed regulations on Hong Kong's position as an international financial centre when they are implemented as originally proposed; 9172 LEGISLATIVE COUNCIL ─ 9 May 2012 (b) what steps the Government has taken and continues to take to convince the United States Government to amend and relax the proposed regulations; and (c) whether the Government has any contingency plan to cope with the impact of the proposed regulations when they are implemented in their current form; if it has, of the details, please? SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY: President, to give Members some perspective, the United States enacted in July 2010 the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), with a view to, among other purposes, "promoting the financial stability of the United States by improving accountability and transparency in the financial system". The Rule, as commonly referred to by the markets, is embodied in section 619 of the Dodd-Frank Act. As we understand it, the Rule aims to prohibit United States banks, their affiliates and holding companies from engaging in two types of business activities, namely, first, proprietary trading, and second, investing in and sponsoring hedge funds and private equity funds. While this Rule is entirely a United States regulation, it appears to seek to apply to the worldwide operations of non-United States banks that have an agent, branch, or subsidiary in the United States. In this light, the implementation of the Rule in its current form appears to entail an extra-territorial reach, thus affecting financial markets outside of the United States. Accordingly, Hong Kong shares the concerns raised by major financial markets, such as Canada, France, Germany, Japan and the United Kingdom, over the extra-territorial reach and the implementation of the Rule. In this connection, the Administration's reply to the three parts of the question is as follows: (a) Hong Kong is concerned that the Rule may bring about the following unintended repercussions: LEGISLATIVE COUNCIL ─ 9 May 2012 9173 (i) non-United States banks that are caught by the Rule may face a substantial compliance burden, as they will have to comply with the onerous record-keeping and reporting requirements imposed by the Rule, if their trading assets and liabilities are higher than US$1 billion on a global consolidated basis; (ii) the Rule may adversely affect the liquidity in non-United States government bond markets, as it only permits regulated banking entities to engage in proprietary trading in United States government securities but not foreign government securities; (iii) it may adversely affect banks' ability to manage funding through the foreign exchange swap market, which is an important interbank funding channel, given that foreign exchange swaps are classified as derivatives, hence subject to the prohibition in connection with proprietary trading; and (iv) it may also affect fund raising activities of hedge funds and private equity funds, because banks subject to the Rule will have to refrain from sponsoring and investing in some of these funds. This in turn may negatively affect the fund management and asset management operations of banks. (b) Given the concerns as highlighted above, the Financial Secretary has written to the United States Department of Treasury earlier this year to indicate the unintended adverse consequences that we see in relation to the application of the Rule. He has specifically invited the United States authorities to consider ring-fencing the application of the Rule and maximizing the exemption, insofar as it relates to banking operations outside of the United States, as well as proprietary trading in respect of non-United States government securities and short-term foreign exchange swaps.