Chapter 5: Financial Services in Hong Kong

Hong Kong maintains a three-tier system of deposit-taking institutions, namely, licensed banks, restricted licence banks and deposit-taking companies. They are collectively known as authorised institutions under the Banking Ordinance. The Hong Kong Monetary Authority (HKMA) is the licensing authority for all three types of authorised institutions.

Only licensed banks may conduct full banking services, including in particular the provision of current and savings accounts and the acceptance of deposits of any size and maturity. Restricted licence banks may take deposits of any maturity of $500,000 or above. Deposit-taking companies are owned mostly by, or otherwise associated with, licensed banks. Deposit-taking companies may take deposits of $100,000 or above with an original maturity of no less than three months.

Hong Kong has one of the highest concentrations of banking institutions in the world. At the end of 2001, 147 licensed banks, 49 restricted licence banks and 54 deposit-taking companies, which were beneficially owned by interests from 31 countries around the world, were in business in Hong Kong. These 250 authorised institutions operated a comprehensive network of 1 507 local branches. In addition, there were 111 representative offices of overseas banks in Hong Kong. A local representative office is not allowed to engage in any banking business, and its role is confined to liaison work between the bank and its customers in Hong Kong.

The total deposit liabilities of all authorised institutions to customers and the total loans and advances extended by these institutions at the end of 2001 were $3,357 billion and $2,186 billion, respectively. The total assets of all authorised institutions amounted to $6,155 billion.

Hong Kong has a robust interbank payment system, which was changed to the Real Time Gross Settlement (RTGS) system in December 1996. The HK Dollar RTGS system is a single-tier settlement structure with all banks maintaining settlement accounts with the HKMA. All RTGS payment transactions are settled in real time across the books of the HKMA. Intraday liquidity can be obtained by the banks through the use of their Exchange Fund Bills and Notes for intraday repurchase (repo) agreements with the HKMA.

Leveraging on the experience with the HK Dollar RTGS system, the HKMA introduced the US Dollar RTGS system in August 2000. The system allows participants to settle US dollar transactions real-time in the Asian time zone and thereby to reduce or eliminate foreign exchange settlement risk caused by the time gap. Since its full implementation, the system has been operating smoothly and has attracted an increasing number of participants. At the end of 2001, there were 65 direct participants and 115 indirect participants. Among the indirect participants, 74 were from overseas. Turnover of the system grew to 3 100 transactions per day with a total value of over US$5.1 billion.

The Central Moneymarkets Unit (CMU) Service, established in 1990, is operated by the HKMA to provide a clearing and custodian system for Exchange Fund Bills and Notes, as well as private sector debt issues. There are 188 CMU members, most of which are financial institutions in Hong Kong. At the end of 2001, there were 1 009 issues with a total value of $208.54 billion equivalent lodged with the CMU. The CMU system accepts both Hong Kong dollar and foreign currency denominated debt instruments. It has been fully integrated with the interbank payment systems, and is linked up with the international central securities depositories like Euroclear and Clearstream to enable overseas investors to trade CMU securities. It has also established bilateral links with the central securities depositories in Australia, New Zealand and the Republic of Korea.

Through a seamless interface with the US Dollar RTGS system, the CMU enables members to settle US dollar securities on a delivery versus payment (DvP) basis. As such, the outstanding amount of US dollar securities lodged with the CMU has increased twofold to US$1.54 billion from the previous year.

The HKMA was established in April 1993. The Exchange Fund (Amendment) Ordinance 1992 provides for its establishment.

The HKMA's policy objectives are to maintain currency stability, within the framework of the Linked Exchange Rate System, through sound management of the Exchange Fund, monetary policy operations and other means deemed necessary; to ensure the safety and stability of the banking system through the regulation of banking business and the business of taking deposits, and the supervision of authorised institutions; and to promote the efficiency, integrity and development of the financial system, particularly payment and settlement arrangements.

The HKMA is an integral part of the Government, but can employ staff on terms different from those of the Civil Service to attract personnel of the appropriate experience and expertise. Its staff and operating costs are charged directly to the Exchange Fund instead of the general revenue. The HKMA is accountable to the Financial Secretary, who is advised by the Exchange Fund Advisory Committee on matters relating to the control of the Exchange Fund.

The HKMA seeks advice on policy matters routinely from the Banking Advisory Committee and Deposit-taking Companies Advisory Committee. Both committees are established under the Banking Ordinance. They are chaired by the Financial Secretary and comprise members from the banking industry and other relevant professions. Members of the committees are appointed by the Financial Secretary under the delegated authority conferred by the Chief Executive.

The Banking Ordinance provides the legal framework for banking supervision in Hong Kong. Under the ordinance, the HKMA is the licensing authority responsible for the authorisation and revocation of all authorised institutions, as well as the approval and revocation of money broker licences. The HKMA seeks to maintain a regulatory framework that is fully in line with international standards, primarily those recommended by the Basel Committee on Banking Supervision. The objective is to devise a prudential supervisory system to help preserve the general stability and effective working of the banking system while at the same time providing sufficient flexibility for authorised institutions to take commercial decisions. Hong Kong's framework of banking supervision is in line with the Core Principles for Effective Banking Supervision promulgated by the Basel Committee.

The HKMA's supervisory approach is based on a policy of 'continuous supervision' through a combination of on-site examinations, off-site reviews, prudential meetings, co-operation with external auditors and meetings with boards of directors. In 2000, the HKMA implemented a risk-based supervisory framework for a number of small to medium-sized local banks. This approach puts emphasis on evaluation of the quality of risk management practices and internal controls in respect of various types of risks faced by authorised institutions. The framework was extended to large local banks and some foreign banks in 2001.

On the international front, the HKMA continues to promote co-operation among central banks in the region, principally through the Executives' Meeting of East Asia-Pacific Central Banks (EMEAP), whose activities cover supervisory liaison and co-operation, development of financial markets and infrastructure, and various areas of central bank operations. The HKMA has chaired a Working Group on banking supervision since its establishment in August 1996 under the direction of the EMEAP. In addition, Hong Kong is a member of the Financial Action Task Force (FATF), an inter-governmental body with the objective of developing and promoting legal, law enforcement and financial regulation policies to combat money laundering. Hong Kong is the President of the FATF for the period from July 2001 to June 2002.

The Banking (Amendment) Bill 2000 proposes amendments to the Banking Ordinance corresponding to the proposals of the Securities and Futures Bill. It aims at enhancing the regulatory framework for the securities business conducted by authorised institutions and bringing it in line with the regulatory standards applicable to securities dealers and investment advisers. The Legislative Council has set up a Bills Committee to consider the two bills.

The HKMA continued to implement the policy initiatives contained in the reform programme announced in 1999 in response to the Banking Sector Consultancy Study. In July, the final phase of interest rate deregulation which covered savings and current accounts was implemented. Since then, banks can compete for deposits freely on a price basis. Deregulation of the interest rate rules has the merits of encouraging more innovation in the banking industry and promoting consumer choices.

The HKMA has convened a Working Group to study the implementation of a Commercial Credit Reference Agency (CCRA). The CCRA would help enhance banks' credit risk management and improve companies' access to bank funding as more credit information about them would become available. The Working Group had made good progress on the design features of the CCRA during the year.

The HKMA had also been promoting consumer data sharing arrangements among banks. At present, data sharing is limited to mainly negative data (i.e. default data) under the privacy legislation. Recent market developments, especially the surge in personal bankruptcies, had highlighted the importance of a greater scope of data sharing for credit assessment by banks. The HKMA will continue to pursue this with the banking industry and the Privacy Commissioner.

Another initiative is the Deposit Insurance Scheme. In April, the Executive Council approved in principle the establishment of a Deposit Insurance Scheme in Hong Kong following broad support received in the earlier public consultation exercise. The HKMA had been asked to undertake a more detailed study on the design features of the scheme. It is envisaged that a further round of public consultation will be conducted in early 2002 on the detailed design issues before making the relevant legislation.

In November, the HKMA removed the three-building condition which restricted foreign banks licensed since 1978 to operate from not more than three buildings. The removal of the condition had provided foreign banks with greater flexibility in doing business and would help to promote Hong Kong's status as an open financial centre.

Recognising the development of electronic banking (e-banking) services, the HKMA has implemented a comprehensive e-banking and technology risk management supervisory framework to ensure a secure and sound control environment for e-banking development in Hong Kong. Under this framework, the HKMA developed an on-site examination programme focusing on e-banking and technology risk management, having regard to the practices of bank supervisors in other advanced economies and the guidance on e-banking risk management issued by the Basel Committee on Banking Supervision. Three pilot examinations were successfully conducted in 2001.

The HKMA has recently reviewed the retail payment systems in Hong Kong. The review examined issues such as efficiency, pricing and costs, degree of market access and level of competition, and found no factor affecting the systemic stability of the payment systems in Hong Kong. The review nevertheless suggested a progressive approach to improve the regulatory framework. The recommendation was to introduce a self-regulatory approach, under which the market would draw up codes of practices and monitor their compliance, while the HKMA would oversee the overall implementation of such approach. With the agreement of the Exchange Fund Advisory Committee and the Government, the HKMA will proceed with implementation of the recommendation in phases. The HKMA is also monitoring closely the development of e-money, and its impact on real money and seigniorage.

In 2001, the HKMA's CMU reached an agreement with Euroclear, the Brussels-based clearance and settlement system, to develop a direct link between them. This fully-automated real-time link will enable Asian investors to directly hold and settle Euroclear-eligible securities via their CMU accounts, thus significantly improving settlement efficiency.

One of the functions of the HKMA is to promote and encourage high standards of conduct and sound and prudent business practices amongst authorised institutions. This is important to maintain public confidence and trust in the banking system. In 2001, after a comprehensive review, the HKMA revised the Code of Banking Practice which sets out the minimum standards to be followed by authorised institutions in their dealings with personal customers. The review covered areas such as credit cards, account and loan services, use of debt collection agencies, electronic banking and stored value cards. The revised code was promulgated in November.

The stock market and the futures market in Hong Kong are operated by the SEHK and the HKFE. Both the SEHK and the HKFE are wholly-owned subsidiaries of the HKEx. At year-end, there were 507 corporate and individual exchange participants trading on the SEHK and 93 exchange participants trading on the HKFE.

Securities transactions on the SEHK are executed by the Automatic Order Matching and Execution System (AMS). To provide the market with a comprehensive trading environment and to further enhance its competitiveness, the SEHK launched the third generation of the system, AMS/3, in three phases from October 2000. Securities trading has been made more sophisticated with the introduction of new trading facilities and investors access channels, such as market making, new order types, the Multi-workstation System (MWS), the Broker Supplied System (BSS) and the Order Routing System (ORS). Straight-through on-line trading has also become possible. At the end of 2001, all exchange participants were connected to the AMS/3.

The HKEx has also developed a new market structure for Exchange Traded Funds (ETF), which are open-ended mutual funds or unit trusts listed or traded on stock exchanges. The iShares MSCI Taiwan Index Fund and iShares MSCI South Korea Index Fund, two MSCI-based ETFs, commenced trading on the SEHK, under a 'trading only' arrangement on May 2.

At year-end, there were 111 companies listed on the Growth Enterprise Market (GEM) with a total market capitalisation of $61 billion, raising an aggregate of $5.7 billion. Average daily turnover was $162 million.

To improve the operation of the GEM market and its competitiveness, a review on the GEM listing rules was conducted by the SEHK in consultation with the market in June 2000. The proposed amendments, including a minimum active business pursuit period of 24 months for listing applicants and the 12-month moratorium period for initial management shareholders, became effective in October 2001.

On derivatives trading, the HKEx successfully migrated the stock options trading to the Hong Kong Futures Automated Trading System (HKATS) on August 6. Trading of the HSI futures and options contracts had already been migrated from the open outcry system to the HKATS in 2000. Derivatives Trading Integration is the first step in the integration of the derivatives market infrastructure. The second step will be the integration of futures and options clearing on the new Derivatives Clearing and Settlement System, or DCASS. The HKEx aims to complete Derivatives Clearing Integration in the second quarter of 2002.

The Hong Kong Securities Clearing Company (HKSCC), a wholly-owned subsidiary of the HKEx, operates the Central Clearing and Settlement System (CCASS) for securities trading at the SEHK. The CCASS is an automated book-entry system that handles the settlement of securities. In addition to brokers and custodians, CCASS services are also available to retail investors. The HKSCC has also expanded its clearing and settlement systems to cover a wider range of financial instruments including the Exchange Fund Notes (EFN) and Hong Kong Mortgage Corporation (HKMC) Notes. Development for an upgraded system, CCASS/3, with modernised system architecture, an open access layer and new functions for risk management and investor protection, is under way.

The Securities and Futures Commission (SFC) was established in May 1989 following enactment of the Securities and Futures Commission Ordinance (SFCO). This represented the first important phase in the overhaul of the regulation of securities and futures market in Hong Kong and the implementation of one of the most important recommendations made by the Securities Review Committee in May 1988.

Established as an autonomous statutory body outside the Civil Service, the SFC has 12 directors (six of them executive) appointed by the Chief Executive. It must present the Financial Secretary with its annual report, budget and an audited statement of its accounts, which are also required to be laid before the legislature.

At the end of 2001, the SFC registered 29 184 persons, of whom 648 were corporate securities dealers, 155 were corporate commodities dealers, 653 were corporate investment advisers and eight were securities margin financiers. As regards the regulation of leveraged foreign exchange trading, the SFC had issued 11 foreign exchange trader licences by the end of 2001.

Following the merger and demutualisation of the SEHK, the HKFE and their associated clearing houses and the establishment of the HKEx on March 6, 2000, the SFC has assumed responsibility for front-line supervision of exchange participants and taken over the disciplinary matters involving these intermediaries. A Memorandum of Understanding was signed in February by the SFC and the HKEx to formalise the SFC's oversight of the HKEx and its subsidiaries, the supervision of Exchange Participants and market surveillance.

The SFC is funded largely by the market and partly by the Government, although no funding has been sought from the latter in the past nine years. Its operating expenditure budget for 2001-02 was $423 million and it had an establishment of 361 in the same financial year.

The SFC seeks advice on policy matters from its Advisory Committee, which comprises three executive directors of the SFC and 12 independent members. They are appointed by the Chief Executive and are broadly based and representative of market participants and relevant professions. Decisions relating to matters concerning the registration of persons and intervention in their business are subject to appeal to the Securities and Futures Appeals Panel (SFAP), the members of which are also independently appointed by the Chief Executive. Under the new Securities and Futures Bill introduced into the legislature in November 2000, the SFAP will be replaced by an independent full-time Securities and Futures Appeals Tribunal. A much wider range of the SFC's decisions will be subject to appeal to the tribunal. In November, a Process Review Panel (PRP) was established to undertake ongoing review of the fairness and consistency of the SFC's internal operational procedures. Members of the PRP are appointed by the Chief Executive.

Over the years, the SFC has developed a framework of securities and futures regulation that is on a par with internationally accepted standards.

The SFC considers investor education the first important step to investor protection. During the year, the SFC published two investor booklets, The A to Z of Stock Investing and Getting Started in Funds and MPF, and launched a new TV/radio Announcement in the Public Interest and bilingual poster campaign. The key message is 'Get the Facts before You Invest'. A number of other educational leaflets and articles were also published to increase investor awareness on topical investment issues, such as Equity-Linked Notes and unauthorised trading. New radio series, including 'Investors' Mastermind' and 'Chit Chat on Facts' were also launched. In addition, to 'train the trainers' and inculcate a healthy attitude towards investment, the SFC organised a series of Teachers' Workshops for secondary school teachers to provide them with basic knowledge about the securities, futures and funds industries and allow them to pass on that knowledge to their students. Educational columns were also published in major newspapers on a regular basis.

During the year, the SFC continued to participate in external relations and international activities, including the commission's work with the International Organisation of Securities Commissions (IOSCO). The SFC chairs the IOSCO Committee responsible for developing implementation and assessment methodologies for the IOSCO Objectives and Principles, and offering assistance to the international financial institutions in their use of financial Objectives and Principles. In addition, the SFC continues to participate in the five working groups of the Technical Committee of IOSCO.

The SFC will host the IOSCO Technical Committee meeting and Executive Committee meeting in January and February, 2002.

The Insider Dealing Tribunal is an important feature of the regulatory framework for the securities market in Hong Kong. Established under the Securities (Insider Dealing) Ordinance, the tribunal looks into cases involving suspected insider dealing referred to it by the Financial Secretary. Since it commenced operation in 1994, the tribunal has successfully concluded 12 cases.

Under the Securities and Futures Bill, the Insider Dealing Tribunal will be replaced by a Market Misconduct Tribunal which will cover five other types of market misconduct in addition to insider dealings.

During the year, the SFC conducted a comprehensive review of the Takeovers and Share Repurchases Codes and consulted the public on a number of proposals. On the completion of the consultation, the SFC in October 2001 announced the amendments to the Code on Takeovers and Mergers with immediate effect. The trigger threshold was reduced from 35 per cent to 30 per cent and the creeper from 5 per cent to 2 per cent in any 12-month period. Transitional provisions were put in place for 10 years for shareholders affected by the change.

In December 2000, the SFC issued a revised Fit and Proper Criteria and the Guidance Note on Competence and the Guidance Note on Continuous Professional Training to affirm the professional standard of financial intermediaries in Hong Kong. The new requirements came into effect in April 2001.

The SFC also consulted the market on a proposed Investor Compensation Arrangement during the year. The new arrangement is based on a per investor compensation limit, as opposed to the old per broker limits, enabling more transparency and allowing investors to know precisely what level of compensation is available to them should their intermediary fail. Comments from the market were reviewed and the new arrangement will become effective when the new regulatory framework introduced under the Securities and Futures Bill is brought into operation.

Hong Kong is one of the most open insurance centres in the world. At the end of 2001, there were 204 authorised insurers, 99 of which were incorporated in Hong Kong and the remaining 105 were incorporated in 24 overseas countries or the Mainland, with the United States taking the lead to be followed by the United Kingdom.

Notwithstanding the economic slowdown, the total gross premiums of the insurance industry reached $64.4 billion in 2000, representing a 11.4 per cent growth over 1999. Gross premiums of the general insurance sector increased by 8.1 per cent to $17.9 billion in 2000. Accident and Health, General Liability and Pecuniary Loss have recorded the most significant growth. Underwriting performance, however, continued to be unfavourable, with an overall loss of $872 million.

The long-term insurance business continued to attain a double-digit growth, with office premiums increasing by 12.6 per cent to $46.5 billion in 2000. The office premiums in force of individual Life business amounted to $35.6 billion, accounting for 76.6 per cent of the total office premiums. The number of Individual Life policies in force grew by 8.5 per cent to 4.6 million in 2000, covering 69.1 per cent of Hong Kong's population.

At the end of 2001, there were 33 187 insurance intermediaries, including 32 788 agents (of whom 2 517 are agency firms) and 399 brokers.

The Commissioner of Insurance, appointed as the Insurance Authority (IA), aims to protect the interests of the insuring public through prudential supervision of the insurance industry in Hong Kong under the Insurance Companies Ordinance (ICO).

The ICO, which prescribes a comprehensive regulatory framework for all classes of insurance business, has two main objectives of ensuring the financial stability of all insurers authorised in Hong Kong and the fitness and propriety of their management. These objectives are achieved through the prescription of, inter alia, the minimum share capital and the solvency margin requirements, and the requirement for directors and controllers of insurers to be fit and proper persons.

A general business insurer is also required to maintain assets in Hong Kong to meet the claims of Hong Kong policy holders. For life insurance business, a fully-fledged appointed actuary system has been implemented to ensure that the insurer would be able to meet its obligations.

Prudential supervision of insurers is carried out mainly through examination of the financial statements, reports of actuaries and other returns submitted by insurers and regular on-site visits. The IA may take interventionary action against an insurer, if considered appropriate, to safeguard the interests of policy-holders. These measures include the limitation of premium income, placing of assets in the IA's custody, assumption of control by a manager appointed by the IA or petitioning for the winding-up of the insurer.

Insurance intermediaries have been brought under the regulation of the ICO since 1995. An insurance agent must be properly appointed by an insurer and an insurer is required to comply with the Code of Practice for the Administration of Insurance Agents in appointing and controlling its agents. An insurance broker must meet certain minimum requirements before he can be authorised.

Self-regulatory measures are in place to strengthen the market discipline in the insurance industry. These measures, formulated by the insurance industry in consultation with the IA, include the adoption of a Code of Conduct for Insurers governing the writing of insurance contracts and insurance benefit illustration standards for life insurance policies.

As a member of the International Association of Insurance Supervisors, Hong Kong endeavours to ensure that its supervisory standards are in line with the principles and standards developed by the association.

To enhance the professionalism of insurance intermediaries, the Insurance Intermediaries Quality Assurance Scheme (IIQAS) was introduced in 2000. Under the scheme, all insurance intermediaries, their chief executives and technical representatives, unless otherwise exempted, are required to pass a qualifying examination before they can be registered or authorised. They are also required to attend continuing professional development programmes thereafter to ensure that the required standard of professionalism is maintained. In view of the increasing popularity of investment-linked insurance products in recent years, an examination paper on investment-linked long-term insurance under the IIQAS was launched in December.

The existing self-regulatory system for insurance intermediaries has been in operation since 1995. In recent years, there have been rapid developments in the industry such as the growing numbers of insurance intermediaries and the increasing sophistication of insurance products. There is also a rising public expectation for better consumer protection. The IA considers that there is a need to review the existing system. It is considering the comments in response to the consultation document on the regulatory system for insurance intermediaries issued last year. It will consult the industry further in 2002.

The IA has launched an educational initiative since 2000 by publishing two educational booklets to enhance the public's understanding of the role of insurance intermediaries. I lens, a quarterly publication to enhance the public knowledge and awareness of insurance matters, has been issued and a 24-hour enquiry hotline has also been set up. In 2001, the IA published the pamphlet entitling Buying Insurance — What you need to know.

On December 1, 2000, the Mandatory Provident Fund (MPF) System was fully implemented to encourage the workforce to save and invest for their retirement protection. The system, which was formulated after extensive consultation, is a privately managed, employment-related mandatory system of provident fund schemes. Unless exempted, employees aged between 18 and 65 and self-employed persons are required to participate in MPF schemes.

The MPF System provides for joint contributions by the employer and employee, each contributing 5 per cent of the employee's relevant income to a registered MPF trust scheme, subject to the maximum and minimum levels of income for contribution purposes. The accrued benefits are fully vested in the scheme members and can be transferred from scheme to scheme when employees change or cease employment. A self-employed person has to contribute 5 per cent of his or her relevant income. In normal circumstances, benefits must be preserved until the scheme member attains the retirement age of 65.

By the end of 2001, about 88 per cent of the employers, 95 per cent of the relevant employees and 91 per cent of the self-employed persons have participated in the MPF. The total MPF assets amounted to about $36 billion, with monthly MPF contributions amounting to some $2 billion.

Unlike the MPF System which is compulsory, occupational retirement schemes (ORSO schemes) registered under the Occupational Retirement Schemes Ordinance (ORSO) are voluntary schemes established by employers. The objective of the ORSO is to regulate such schemes through a registration system to ensure that they are properly administered and funded. All registered schemes must meet certain requirements, including asset separation, independent trusteeship, restricted investments, funding, independent audit, actuarial reviews, information disclosure and the submission of audited financial statements to the ORSO Registrar.

To tie in with the implementation of the MPF System, ORSO schemes that fulfilled certain conditions were granted MPF exemption. Members of such schemes may choose to remain in the existing scheme or join a MPF scheme. At the end of 2001, there were 6 065 MPF-exempted ORSO schemes covering more than 500 000 employees.

The Mandatory Provident Fund Schemes Authority (MPFA), which was set up in September 1998 under the Mandatory Provident Fund Schemes Ordinance (MPFSO), is tasked with the responsibility of the regulation and supervision of the MPF System and ensuring compliance with the MPFSO. Two statutory committees, the MPF Schemes Advisory Committee and the MPF Industry Schemes Committee, have been established to advise the MPFA on the overall operation of the MPFSO and the Industry Schemes, respectively. A MPF Schemes Appeal Board has also been set up under the MPFSO to hear appeals against the decisions of the MPFA.

To ensure that the interests of MPF scheme members are protected, the MPFA closely monitors the operation of MPF trustees and other service providers, investigates complaints about non-compliance and takes enforcement actions accordingly. Proactive inspections are also carried out at business premises to ensure compliance of employers in enrolling their employees in MPF schemes and making contributions. On public education, the MPFA's emphasis for 2001 was on MPF investment.

Apart from supervising and regulating the MPF System, the MPFA is also the Registrar under the ORSO.

The MPFA continues to review the MPF legislation in the light of operational experience. In May, the Mandatory Provident Fund Schemes (Amendment) Bill 2001, containing amendments related to certain operational and technical issues of MPF schemes, was introduced into the Legislative Council. In addition, an MPF Schemes Operation Review Committee comprising representatives of employers, employees and service providers was set up in August. It is tasked to undertake a comprehensive review on the administrative and operational aspects of the MPF legislation and to make relevant recommendations to amend the MPF legislation in order to enhance the effectiveness and efficiency of the MPF System. The Review Committee completed the first phase of its work by the end of the year. Taking into account its recommendations (which have been endorsed by MPFA), the Government plans to introduce a bill to amend the MPF legislation in 2002.

During the year, the MPFA has reviewed the ORSO legislation with a view to facilitating the administration of ORSO schemes and improving the effectiveness of scheme regulation. The industry has been consulted on the proposed legislative amendments, which would be submitted to the Government in 2002.