Self-Governance and State Regulation

In addition to a code of conduct proclaimed by individual banks, Hong Kong and Australia each have a code of banking practice issued by the respective banking associations. In order to appreciate the banking situation in Hong Kong, it is worthwhile to look at the Hong Kong Association of Banks (HKAB) and to examine its role and its relationship with the Hong Kong Monetary Authority (HKMA), which has the exclusive power to approve the establishment of licensed banks, restricted banks and deposit-taking companies, but the focus in this monograph is only on licensed banks. Once a bank receives a license to operate, it has a statutory obligation to become a member of the HKAB, which has traditionally had a pivotal role in the establishment of banking practices and guidelines. The locally established banks are entitled to select their own representatives, whereas the foreign banks have to choose representatives according to their geographical grouping. The HKAB has three permanent members, namely the Hong Kong Bank (HSBC), the Standard Chartered Bank and the Bank of China, each of which rotates annually as chair of the HKAB. These three are not only the largest banks in Hong Kong but also have a notable statutory function, namely as officially designated note issuers of the Hong Kong currency which is a unique privilege held only by central banks in other countries.