Macroeconomic environment and the impacts of interest rate normalization
Mr CHAN Chun-ying noted that the differential between the one-month Hong Kong interbank offered rate (“HIBOR”) and the one-month London interbank offered rate had narrowed recently. The one-month HIBOR had also increased by some 70% from end June 2017 to end October 2017. He sought HKMA’s assessment of the trend of banks’ prime rates movement in Hong Kong.
CE/HKMA responded that the one-month HIBOR remained at a relatively low level despite the recent increase. The rise in one-month HIBOR was partly attributable to an increase in demand for funds arising from initial public offering activities. CE/HKMA advised that the mortgage rates depended on the sources and costs of capital of individual banks. HIBOR would only be one of the factors for the retail banks to determine their prime rates. In light of the US interest rate normalization, it was anticipated that the local prime rates would rise eventually.
Development of financial technologies
Mr CHAN Chun-ying noted that HKMA was discussing with the relevant authorities in Singapore on linking the digital trade finance platforms being developed separately in Hong Kong and Singapore, and enquired if the collaboration would be extended to cover Hong Kong’s major trading partners including the Mainland, the US and the European Union.
CE/HKMA replied that while initially the cross-border linkage would be between Hong Kong and Singapore, the platform would be designed with an open architecture. This would allow Hong Kong’s other trading partners to plug into it easily in future if the platform proved to be a success.
The Exchange Fund
Mr CHAN Chun-ying enquired whether EF’s fee payment to the fiscal reserves would be increased given EF’s extremely good investment performance in 2017.
CE/HKMA advised that under the current arrangement with the Government, the return on the fiscal reserves placed with EF was calculated based on the average annual investment return of EF’s Investment Portfolio over the past six years. This arrangement was designed to enhance the stability of investment return for the fiscal reserves.
Facilities in the new Inland Revenue Tower
Mr CHAN Chun-ying, Mr WONG Ting-kwong and Dr CHIANG Lai-wan asked whether the permitted development plot ratio of the site of the new IR Tower had been fully utilized. Noting that the estimated cost per square foot of the new IR Tower would amount to $7,300 (in MOD Prices), to allow members to evaluate the cost effectiveness of the project, Mr CHAN suggested that the Administration should provide a breakdown on building costs and fitting-out expenses of the new IR Tower when submitting the funding proposal to PWSC and FC.
Acting Project Director 1 of Architectural Services Department (“PD/ArchSD”) responded that under the relevant Outline Zoning Plan, there was no restriction on development plot ratio for the proposed site. However, the Planning Department had provided a reference plot ratio of 7.6 for the site, and the gross floor area for the project would be planned to meet the limit of the reference plot ratio. DS(Tsy)2 added that the permitted building height of the site was 60 metres. In order to better utilize the site for the project, ArchSD had obtained approval from the Town Planning Board to relax the height restriction of the site from 60 metres to 80 metres. DS(Tsy)2 also added that the new IR Tower would have a total gross floor area of about 73 000 square metres, and a net operational floor area (“NOFA”) of about 45 000 square metres to accommodate all IRD offices. This would represent an increase of 3 000 square metres in NOFA compared to the current Revenue Tower in Wan Chai. Area for frontline services of IRD, such as the Stamp Office and the Business Registration Office, would be considerably increased in the new IR Tower. The Government would provide the breakdown on the cost of construction works and other associated costs for the project when submitting the proposal to PWSC and FC.
Accessibility of the new Inland Revenue Tower
Noting that currently there was only one footbridge across Prince Edward Road East connecting KTD Area and San Po Kong District, Mr CHAN Chun-ying and Mr WONG Ting-kwong expressed concern about the accessibility of the new IR Tower to the public. Dr CHIANG Lai-wan urged the Administration to provide covered passage connecting the new IR Tower and the future Kai Tak Station of the Shatin-to-Central Link.
PD/ArchSD responded that apart from the existing footbridge from Mikiki Shopping Centre across Prince Edward Road East, there was also an existing subway linking Kowloon City District across Prince Edward Road East to the site. Besides, visitors could reach the new IR Tower via a new pedestrian subway under construction across Prince Edward Road East from San Po Kong District. Visitors could also walk along at ground level for about five to ten minutes from the future Kai Tak Station to the new IR Tower. ArchSD would convey Dr CHIANG’s suggestion of providing covered passage between the new IR Tower and the Kai Tak Station to relevant departments for consideration
Work of the Financial Services Development Council
As the incorporated FSDC could accept sponsorship when organizing commercial events, Mr CHAN Chun-ying enquired how FSDC would ensure there would be no conflict of interests for FSDC in accepting the sponsorship.
C/FSDC responded that FSDC members were appointed from different sectors of the financial services industry having regard to their background, experience and expertise. Working groups were formed comprising members and subject experts from different backgrounds based on the topics under study, and the recommendations would undergo thorough deliberation at the committee and council levels before the reports were put forward to the Government. Members were required to declare if they had potential conflict of interest on the research topics, and such declarations would be recorded in the meeting notes. She considered that the mechanism already in place would ensure impartiality of FSDC’s recommendations. USFST supplemented that, as a public organization, FSDC was covered under the Prevention of Bribery Ordinance (Cap. 201), and this would remain unchanged for the incorporated FSDC.
Proposed incorporation of the Financial Services Development Council
Mr CHAN Chun-ying supported the proposal to incorporate FSDC as a company limited by guarantee. As the incorporated FSDC would need to compete with the market in recruiting talents, the proposed staff cost of $16.6 million might not be sufficient. Mr CHAN said that FSDC should raise the matter with the Administration should it find that the proposed funding was inadequate.
C/FSDC said the incorporated FSDC would have a headcount of around 13, including a remunerable position of an Executive Director. The incorporated FSDC could review its staffing arrangement in light of its operational experience after the incorporation, and consider applying for additional funding from the Government should resources deem insufficient. On the financial arrangement, USFST said that the one-off set-up funding and the annual subvention for the incorporated FSDC would be included in the Government’s Budget for 2018-2019 and subsequent years; and the funding, under the estimate of expenditure of the Financial Services Branch of FSTB, was subject to the approval of LegCo.