Speech presented by the Monetary Authority of Macao
At
the Spring Cocktail Reception
(March 8, 2006)
The Honorable Secretary for Economy and Finance, Mr. Francis Tam;
The Honorable Deputy Director of the Economic Affairs Department of the Liaison Office of the Central People’s Government in the MSAR, Mr. Li Chunman;
The Honorable Chairman of the Audit Committee of AMCM, Mr. Leonel Alberto Alves;
The Honorable Chairman of the Macau Association of Banks, Mr. Zhang Hongyi;
The Honorable President of the Macau Insurers’ Association, Mr. Jiang Yidao;
The Honorable President of the Macau Insurance Agents and Brokers Association, Mr. Lau Weng Hang;
The Honorable President of the Federation of Macau Professional Insurance Intermediaries, Mr. Lau Seak Lon;
The Honorable President of the Macau Financial Markets Association, Mr. Chan Kam Chun;
The Honorable President of the Association of Macau Financial Employees, Mr. Ng Chi Peng;
The Honorable President of the Macau Money Changers Association, Ho Hao Chio;
Distinguished guests, media representatives, dear colleagues;
Everything seems to pulsate with vibrant energy when all living things have come back to life again with rejuvenated vitality. On the occasion of this reception held in the melody of spring, we farewell the past and embrace the future. Here, I take the liberty of representing the Board of the Monetary Authority of Macao (AMCM) to extend our warmest welcome and heartfelt appreciation to Mr. Francis Tam, the Secretary for Economy and Finance; Mr. Li Chunman, the Deputy Director of the Economic Affairs Department of the Liaison Office of the Central People’s Government in MSAR; our distinguished guests and all media representatives. Moreover, I would like to express my sincere gratitude to Mr. Francis Tam for his unremitting support and guidance; to the government departments, all sectors of the society and the business communities for their support and co-operation, as well as to my colleagues for their dedication and efforts.
After reversion to our Motherland, the MSAR government has garnered support from the Central Government in the attempt of launching a series of measures aimed at restructuring the economy and stimulating growth. These measures have proven to be effective as they are shaping well and delivering results. A solid economic foundation has been laid, which demonstrated significant momentum for sustainable growth.
In 2005, the banking sector has capitalized on the potentials brought about by Macao’s sustained economic growth. On business front, the banks have broadened their service domain; more products have been made available, customer services have been enhanced, business practices and functions have been reinforced, service standard and business development have been improved. Internally, there has been further strengthening in risk management, cost control and operational efficiency. Consequently, we witness significant improvement in overall performance of the banking sector which is characterized by its highly internationalized operation, diversified products and services, and high-tech driven development. As a whole, the banking industry has sailed through 2005 with flying colours. As at year end 2005, total assets of the banking sector jumped 26.6% to MOP216.5 billion; deposits increased by 29.4% to MOP184.8 billion; loans stood at MOP65.2 billion, representing an increase of 24.1%; loan to deposit ratio was 35.3% while non-performing loan ratio was at record low of 1.8%. Capital adequacy ratio was 15%, far better than the benchmark set by the Basel Committee. Overall annual profit jumped remarkably year-on-year by 123.6% to MOP3.31 billion. In the year, we have 3 new entrants to the sector, of which 2 are engaged in offshore banking business.
Renminbi business in Macao has been sound since its official introduction in November 2004. It has facilitated cross-border consumption and trade. As at the end of 2005, the balance of renminbi deposits totalled RMB434 million while total amount of currency exchange reached RMB1 billion. At the moment, the business is on threshold of the second phase for further expansion. We believe that, in the not so distant future, further broadening of the scope and loosening of restrictions of the business will be achieved.
As at the end of the year, the exchange reserves of the MSAR reached a total amount of MOP53.4 billion, representing an increase of 22.7% when compared with the previous year. As regards the MSAR Reserve Fund, the balance was MOP11.07 billion. We continue to follow a prudent investment strategy in managing the MSAR Reserves to achieve growth with safety and stability. As a result, it is capable of posting reasonable return amid the volatile financial market.
Regarding monetary policy, the MSAR continues to adopt the policies of free flow of fund, free currency convertibility, market driven interest rate and the link of Pataca to the Hong Kong Dollar. Through the appropriate use of different kinds of monetary policy instruments, we have succeeded in ensuring the stability and convertibility of the Pataca.
As ever, financial stability and development are our major objectives when comes to carrying out our duty of supervision within the framework of the current statutes and regulations. We focus on risks management and internal control mechanism while carrying out banking supervision through onsite inspection, offsite surveillance as well as other relevant tools and measures. In the past year, many banks, in compliance with published guidelines and in accordance with their own needs arising from business development, have built up, enhanced and strengthened their internal control mechanism and reinforced risk management function. In the face of limited resources and rapid development, we have restructured part of our supervisory functions, in particular banking supervision to pave the way to further fortify the supervision of banks operating in Macao.
In our effort to combat money laundering and terrorist financing, we have been working closely with international bodies and regional supervisory authorities of which we are a member. The Asia Pacific Group on Money Laundering and the International Monetary Fund had separately visited Macao to assess the implementation of such measures. We have received positive appraisals and constructive recommendation for improvement. Based on these recommendations, we have already requested the financial institutions to strictly abide by the applicable laws and regulations as well as resolutions of the United Nations Security Council. In addition, a specialized cross-departmental anti-money laundering taskforce was established to complement the efforts of the MSAR government in this respect. A mechanism for regular meetings was set up.
To comply with international standard, particularly the recommendations of FATF, the MSAR government has already finalized bills on anti-money laundering and combating terrorist financing. In the meantime, the bills have already been generally passed by the Legislative Assembly and are being discussed article by article. It is expected to be promulgated soon subsequent to enactment by the Assembly. In the move to prepare for the implementation of the new laws and related international standards, we have basically revised the existing guidelines on anti-money laundering. Once the laws have been promulgated, we will make the guidelines available to the business sector for consultation so as to be ready for implementation later this year.
With the turnaround of the MSAR economy, the insurance sector has also performed satisfactorily in the year 2005. As per provisional figures, gross premium registered a 16.8% growth to MOP2.21 billion in 2005. Non-life insurance continued to gather steam by registering an increase of 27.1% to MOP580 million. Life insurance maintains stable performance with total premium grew at a rate of 13.5% to MOP1.63 billion. Private pension fund scheme has also secured a faster development. As per provisional data, the number of registered entities in 2005 improved by 29.1% to 213. Workforce covered by the scheme increased by 22.9% to 43,000. Assets under fund management increased by 12.2% to MOP2.3 billion. On the insurance supervision front, while our initiatives are meant to facilitate stable market development, ensure fair market competition and protect the legitimate interest of the consumers, we also tend to fine tune the relevant comprehensive legislations and their implementation.
Apart from reinforcing financial supervision, the AMCM also dedicated efforts to foster economic and financial development. In February 2005, AMCM, the Macau Insurers’ Association, the Macau Insurance Agents and Brokers Association and the Federation of Macau Professional Insurance Intermediaries jointly organized the second insurance exhibition with the third one to be held in coming April. In May 2005, the AMCM hosted the 2005 annual meeting of the International Association of Insurance Fraud Agencies (IAIFA). In June 2005, the AMCM jointly organized with the People’s Bank of China a meeting in Dongguan on “Assessing the performance of renminbi business in Macao.” Consensus was arrived at on ways and means to further loosening the limitation imposed on the scope of renminbi business. In July, we joined the MSAR official delegation to participate in the 2nd Pan-Pearl River Delta Regional Cooperation Forum, which was held in Chengdu, Sichuan. In 2005, the AMCM continued with the practice of conducting half yearly conventional meetings with the Guangzhou Branch of the People’s Bank of China, the Hong Kong Monetary Authority and the Securities and Futures Commission. As usual, we held the annual quadruple meeting with the Guangdong Bureau of China Insurance Regulatory Commission, Shenzhen Bureau of the China Insurance Regulatory Commission and the Office of the Commissioner of Insurance of Hong Kong. This meeting mechanism has been established to enable each party to keep abreast of the latest economic, financial and insurance industry development of its counterparts, share supervisory measures that have been proven to be effective, deliberate issues relating to supervisory coordination and cooperation between cross-border institutions. Besides, the AMCM visited the Guangdong and Shenzhen Bureaus of the China Banking Regulatory Commission as well as the Shenzhen Central Sub-branch of the People’s Bank of China.
Since reversion to the Motherland, the MSAR has laid a solid foundation for economic growth and identified a practicable direction for development. With the existing favourable factors and economic development policies, it is expected that the growth of the MSAR economy will be able to sustain in the near future. We believe that our financial sector will take advantage of such unique opportunity to exploit new business frontier by confronting new challenges, improving service quality and penetrating the financial market. At the same time, it will not forget to enhance risk management and internal control to ensure operational stability. By all means, AMCM will continue to play the role of regulator and facilitator in prompting the MSAR financial sector to elevate to a higher level of development in a prudent and solid manner.
Finally, I would like to wish all of you happiness, health and prosperity.
Thank you.