Financial Leadership Training Program
In Hong Kong, China
The training program on Financial Leadership is organized by the ASEAN+3 Macroeconomic Research Organization (AMRO) in collaboration with the Asian Development Bank Research Institute (ADB Institute) and the Asian Development Bank Research Institute (ADB Institute), Hong Kong Monetary Authority held from December 11-14, 2023 in Hong Kong, China.
Participants in the training program include representatives of the Ministries of Finance and Central Banks of ASEAN member countries, along with speakers from the AMRO Research Office, the Asian Development Bank Institute, and representatives of Hong Kong Monetary Authority (HKMA). On behalf of the Ministry of Finance of Vietnam, there were representatives of the Department of International Cooperation and the Institute of Financial Strategy and Policy in attendance.
The content of the training program focuses on 3 main parts: (1) Overview of the world economic situation and the ASEAN+3 region, financial cooperation issues in the ASEAN+3 region, challenges for regional macroeconomics and effective solution strategies; (2) Regional cooperation topics such as sustainable finance and financial digitalization; (3) Improve regional cooperation skills such as awareness of the power of cooperation, building meaningful connections, creating a culture of coordination within the organization, building leadership skills; (4) Practical program to learn about the Hong Kong Science and Technology Center, the management and operation of Hong Kong's railway transport system.
1. Cooperation issues in ASEAN+3 and the role of the regional financial safety network
ASEAN+3 economies recovered at different speeds with different levels of inflationary pressure, whereby countries had different policy coordination – both in terms of monetary policy and fiscal policy. Monetary-fiscal policy coordination emphasizes the need to build a policy system that ensures fiscal consolidation and reasonable reserve accumulation.
As growth accelerates, tightening and implementing macroprudential measures may be considered to limit debt accumulation and ensure reasonable lending standards, while at the same time, maintaining stability. of the financial system.
Policymakers need to tailor policies to strike the right balance between building resilience and ensuring growth. Institutional issues need to be resolved through policy improvement to enhance competitiveness and long-term growth potential. Some issues to consider in perfecting institutions:
Competing capability: Infrastructure development, improvement of labor-related policies (skill improvement, salary and bonus structure), strategic industrial master planning, FDI and trade policies, legal reform.
Climate Change: Reducing emissions, building resilience to natural disasters, transitioning to a low-carbon economy through transparency and setting standards, researching and applying carbon tax/trading, green/sustainable finance solid, etc
Digitizing: Digital adoption in the public and private sectors, focusing on cyber security and cyber resilience, promoting digital awareness and education, preparing the workforce for this sector, effectively managing digital platforms (domestic and cross-border).
Countries in the region have close cooperation in the ASEAN+3 financial cooperation process in responding to the impacts of the financial crisis at the regional and world levels.
The global financial safety net, or in other words, the monetary resources for crisis resolution and response, is made up of a country's foreign exchange reserves and external sources such as agreements bilateral, regional agreements, from the International Monetary Fund (IMF). The IMF's lending tools have been used frequently and widely in recent times. However, it can take a long time to access loans through negotiating loan conditions, and there are negative signaling effects associated with accessing loans (such as “requirements”). ceiling" on public spending, conditions for applying "austerity" measures, strict requirements on reducing fuel and food subsidies...). Meanwhile, the regional financial agreement is designed for quick disbursement and has a regular and continuous regional monitoring mechanism. CMIM arrangements in the ASEAN+3 region are limited to short-term liquidity issues.
Cooperation in the ASEAN+3 region focuses on the following contents: financial safety net, strengthening macroeconomic monitoring capacity, promoting the development of local currency bond markets and field research. New cooperation – payment in local currency. Cooperation is based on the Chiang Mai Initiative Multilateralization Agreement (CMIM) signed by member countries in 2009.
The CMIM agreement is a form of short-term financial support between countries in the ASEAN+3 region implemented through currency swap transactions between central banks for CMIM members to resolve urgent difficulties. in the balance of payments and USD liquidity to achieve the goal of monetary and macroeconomic stability. Since 2011, member countries have agreed to expand the scope of the Agreement, not only limited to crisis resolution functions but also adding crisis prevention functions to strengthen the financial security network. as a self-defense mechanism and strengthening market confidence in the regional economy.
The ASEAN+3 Macroeconomic Monitoring Agency (AMRO) was established in 2011 to perform the task of analyzing and monitoring the regional macroeconomics, supporting the operation of CMIM and deciding on loan from CMIM Executive Board.AMRO monitors, evaluates and reports to member countries on the macroeconomic situation and financial soundness; identify financial and macroeconomic risks and vulnerabilities and assist in the timely development of policy recommendations to mitigate those risks, support member countries in implementing the CMIM Agreement, technical support and capacity building activities.
2. Topics on sustainable finance and financial digitalization
2.1. Sustainable finance
AMRO experts, speakers from the Asian Development Bank Research Institute, Hong Kong Monetary Authority, HSBC gave presentations on Climate and Nature-related Risks and their impacts to financial stability, sustainable finance, measures to promote green and sustainable financial development in Hong Kong, opportunities and challenges for sustainable bonds in the Asia-Pacific region (APAC) .
- Financial risks related to climate and nature can impact financial stability through three types of risks: (i) Physical risks arising from extreme meteorological and climate phenomena; (ii) Transition risks arising from the transition to a low-carbon economy; and (iii) Legal liability risks arising from increased compensation for economic entities affected by climate change.
Conceptually, climate-related risks can be understood as a subset of nature-related risks. Meanwhile, on the practical side, the first studies are now being conducted to understand nature-related risks and financial risks more broadly, beyond the climate of the Southeast. ASIAN. The current trend focuses on climate-related financial risks and does not necessarily include nature.
Achieving the goal of sustainable development requires a trade-off between physical risk and transition risk. Three key entities/elements help achieve the net zero emissions target: Governments, people and sustainable financial markets.
In recent years, China, the United States and Germany have been the leading countries in issuing green bonds. Figures for 2022 show that China issued over 85 billion USD, the United States over 64 billion USD, and Germany over 61 billion USD. The Euro area accounts for the largest proportion of global green bond issuance, followed by the USD and the Chinese Yuan. Some ASEAN+3 regional economies issue green bonds in local currencies: Malaysia, Philippines, Thailand (100%), Singapore (94%), China (78%), Hong Kong (66%), Japan (40%), and Korea (35%).
In the transition, it can be seen that some industries are difficult to reduce such as cement, steel, chemicals, shipping, aviation - this group accounts for 30% of emissions and the coal and gas power group accounts for 25% of emissions.
- Measures to promote green and sustainable financial development in Hong Kong: The Hong Kong government focuses on a 3-pronged development strategy, including: (i) Regulation & standards: establish clear rules for the financial industry, (ii) Infrastructure: building capacity and dataand (iii) Awareness: increase market awareness and engagement.
Develop clear rules for the financial sector on risk management, incorporate climate risk considerations into supervision, and issue high-level principles on planning for the transition to a net-zero economy zero, to support them in remaining safe and healthy during the transition; transparently disclose climate-related information and climate-related financial information; released a green taxonomy framework template to facilitate navigation between common platform taxonomies.
The pilot Green and Sustainable Finance Capacity Building Support Program was launched in December 2022 to provide subsidies to market practitioners, students and graduates participating in training. Develop a new module (core level) on Green and Sustainable Finance under the HKMA Enhanced Competency Framework (ECF) for banking practitioners; develop young talent through providing training and internship opportunities through the Sustainable Finance Internship Initiative from October 2022.
Raising awareness and market participation: To date, through the Government's Green Bond Program, approximately USD 24 billion in green bonds in various currencies have been issued to finance more than 70 government green project. Issue retail green bonds in 2022 and 2023 for public participation, and a Green Bond report is published annually to provide information on the distribution of proceeds and expected environmental benefits.
Financial incentives for green and sustainable financing programs:Supports more than 300 green and sustainable debt instruments issued in Hong Kong, with a total value of approximately 90 billion USD;Promote best practices in the market through encouraging the use of external assessment services in accordance with international principles.
The Hong Kong Monetary Authority believes that paying due attention to environmental, social and governance (ESG) factors can deliver long-term sustainable value and minimize the associated risks of the loan. From 2022, HKMA aims to achieve net zero emissions for the portfolio by 2050.
2.2. Financial digitalization
Representatives of the Hong Kong Monetary Authority and the Securities and Futures Commission shared information about digital transformation in the financial sector.
- Regarding the appropriate management mechanism for digital currency issuers: HKMA develops and calls by the term “stablecoin” instead of cypto coin: “stable” implies maintaining a stable value related to one or more assets, typically currencies, and “coin” is a type of virtual asset that represents digital value on the block chain. To ensure the safety and stability of "stablecoins", a system of regulations is needed to regulate. Currently, fiat-referenced stablecoins are mainly used as a medium of exchange and store of value in the virtual asset ecosystem. Potentially, fiat-referenced stablecoins could be used as a means of payment in the real economy.
Risks associated with issuing fiat-referenced stablecoins: Inadequate design for stablecoin algorithms; credit, liquidity and market risks in reserve management; limitations in governance and risk management; conflicts of interest, technological failures and operational vulnerabilities.
Hong Kong's approach is to promote the sustainable and responsible development of the virtual assets sector by introducing the necessary regulations. Hong Kong has issued a Policy Statement on the development of virtual assets in Hong Kong, and at the same time developed a legal framework in the field of virtual assets (Regulatory mechanism for virtual asset service providers by the Commission Regulated Securities and Futures Options, Regulator for Stablecoin Issuers, Regulated by the Hong Kong Monetary Authority). Policy objectives include ensuring financial and monetary stability, minimizing the risk of regulatory arbitrage, and protecting users.
Consultation process on management mechanism for stablecoins: Issue a discussion paper on crypto assets and stablecoins for consultation in January 2022; issue draft report conclusions in January 2023. The next step is to issue a consultation paper on legislative proposals to implement a regulatory regime for stablecoin issuers in Hong Kong. Besides the digital currency, the Hong Kong Monetary Authority also researches and tests project management tools for cross-border payments, retail and wholesale payments.
3. Content on financial leadership capacity training
The program focuses on improving skills in collaboration such as awareness of the power of collaboration, building meaningful connections, creating a culture of collaboration in the organization, and building leadership skills.
- Understand the power of partnerships: Introduction to partnerships and their importance in leadership; Benefits and challenges of forming partnerships; Case studies of successful partnerships and their impact on the organization.
- Building meaningful connections: The art of connecting and building relationships; Strategies to initiate connections and nurture relationships; Communicate effectively and listen actively in building social relationships.
- Create a culture of cooperation: Nurture a collaborative mindset in the organization; Build trust and mutual respect among team/organization members; encourage a culture of sharing and learning from each other.
- Strengthening leadership capacity: The role of leaders in promoting partnerships and social relations; Empower team members to take ownership of relationships; Training and consulting for successful cooperation.
4. Reality activities
Within the framework of the Program, students have the opportunity to visit and learn about the Hong Kong Science and Technology Park, the management and operation of Hong Kong's railway transport system (MRT).
At the Hong Kong Science and Technology Park, students heard technology start-ups at the Center present and share the development of AI technology products in the fields of finance, banking, and technology. Fintech finance in anti-money laundering.
(Hong Kong Science and Technology Center)
At the Management and Operations Center of the Hong Kong Railway Corporation, students can visit the operating area, hear an introduction to the MRT system, and manage and operate the system. The Corporation's representative said that the Hong Kong Government holds about 76% of the capital in the Corporation. Hong Kong Railway Corporation has recently operated the MRT system under the "Rail plus Property" model - this is a model that helps the Corporation have financial autonomy in construction, operation and investment activities, maintenance, development and expansion of the MRT system. Hong Kong has even exported this MRT operating technology to Australia, England, and Sweden.
The "Rail plus Property" model is a business model based on the Hong Kong Government that allows MRT to profit from increased asset value after the construction of railway lines. For new railway lines, the government grants MTR “development rights” to land at stations or depots along the line.
MTR would then build the new rail line and partner with private developers to build the properties. The selection of a private developer is done through a competitive bidding process. MTR receives a portion of the profits that developers make from these properties; This share can be a percentage of gross development profits, a fixed sum or a portion of the commercial assets built on the site. In addition, MRT's revenue comes from leasing underground cable systems under the MRT system to telecommunications companies, leasing advertising at train station systems, and advertising at commercial buildings in the station area. ship. By holding part of the value of land and assets surrounding railway lines, exploiting revenue sources, Hong Kong Railway Corporation creates capital for new projects as well as for operating activities. and maintenance. Therefore, MRT does not need government subsidies or loans.
5. General evaluation of the training course
Representatives of the countries attending the training course highly appreciated the quality of the course program content. In addition to providing knowledge about leadership capacity and updated knowledge on current topics of interest in the financial sector such as sustainable finance and digital transformation, the program is designed to help to actively participate in discussions and connections between students on specific issues to ensure the effectiveness of the course. In particular, along with providing theoretical training, the program has practical experiences associated with knowledge for students. Some opinions say that the content of knowledge and information is relatively high for a short course, requiring students to spend time preparing carefully as well as doing more in-depth research after the course.
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