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Hong Kong Banking Sector: 2017 Year-end Review and
Priorities for 2018
Hong Kong Monetary Authority
1 February 2018
Outline
1. Banking Sector in 2017 2. Review of Work in 2017 3. Major Risk Scenarios 4. Work Priorities for 2018 5. Major Developmental Trends
2
3
Banking sector in 2017 Hong Kong’s banking sector remains safe and sound
Banking sector in 2017 Credit Growth and Asset Quality
4
Review of Work in 2017
5
Banking stability
Fintech development
Implementation of international standards
Financial inclusion and consumer protection
Culture and capacity building
Major Risk Scenarios
Growing penetration of Fintech firms
Cyber attacks on critical infrastructure
or major players
Credit cycle reversal
Abrupt reversal of
capital flows
Possible mis-selling amid prevailing positive market
sentiment
Hong Kong banking sector
6
Geopolitical events
Work Priorities for 2018
Cyber attacks on critical infrastructure
or major players
7
• Monitor completion of iCAST by Phase 1 institutions
• Continue to enhance cyber security intelligence sharing within the industry
Work Priorities for 2018
Geopolitical events
8
• Sanctions compliance
• Information and intelligence sharing
• Risk-based approach
Work Priorities for 2018
Possible mis-selling amid prevailing
market sentiment
9
• Selling practice of popular investment products
• Selling practice of new insurance products
Work Priorities for 2018
Abrupt reversal of capital flows
Geopolitical events
Abrupt reversal of capital flows
10
• Strengthen banks’ internal liquidity stress testing
• Assess banks’ management of USD funding risk
• Monitor implementation of Net Stable Funding Ratio (NSFR) by banks
Work Priorities for 2018
Credit cycle reversal
11
• Continue to promote sound underwriting practices, particularly in relation to lending to property developers which increased considerably in 2017
• Enhance surveillance of exposures to large corporates
Work Priorities for 2018
Growing penetration of Fintech firms
12
Continue to engage senior management of banks to understand their latest strategies
Major Developmental Trends
13
Fintech
Growth of wealth management business
Migration of derivative books of international banks
Banking Made Easy
Supervision of fast growing private banks
Modernise large exposure rules
Enhance internal model validation capability
Guideline on Authorization of virtual banks
Major Developmental Trends
14
Basel 3
Others
Implementation of international standards
Promote effective risk governance