For discussion EC(98-99)7
on 14 October 1998
ITEM FOR ESTABLISHMENT SUBCOMMITTEE
OF FINANCE COMMITTEE
HEAD 148 - GOVERNMENT SECRETARIAT :
FINANCIAL SERVICES BUREAU
Subhead 001 Salaries
Members are invited to recommend to Finance Committee the creation of the following supernumerary post for the period up to 31 March 2000 in the Financial Services Bureau -
1 Administrative Officer Staff Grade C
(D2) ($116,650 - $123,850)
The Financial Services Bureau (FSB) does not have adequate directorate staffing support to implement a number of new initiatives to tackle the year 2000 (Y2K) compliance problem1
, and to enhance the infrastructure of the financial services sector in Hong Kong.
2. The Secretary for Financial Services (SFS) proposes to strengthen the directorate structure of FSB by the creation of one supernumerary post of Administrative Officer Staff Grade C (AOSGC) (D2) for the period up to
March 2000 to head the newly-established Financial Infrastructure (FI) section.
Year 2000 readiness of the financial services sector
3. With Y2K approaching, there has been increasing concern about the Y2K readiness of key economic sectors. As in most other sectors, computer systems are widely used in the financial services sector to handle dates for sorting, comparison, validation to complex calculations, etc. The banking and securities industries, in particular, rely heavily on computer systems and networks, including internal systems and external systems connected with them, in their day-to-day transactions, and clearing and settlement of financial instruments and payments. They also need the support of many other systems with embedded date-coding chips to maintain their operations, such as communication equipment, water chill system and backup lighting and electricity supply.
4. Given the importance of the Y2K issue and its significant impact on the financial services sector and the economy as a whole, we have set up in March 1998 a Steering Committee2
to co-ordinate the efforts of Government, regulators and the financial industries to tackle the Y2K problem to ensure as far as possible that the financial services sector as a whole would sail through the millennium. While members of the Steering Committee have devoted a lot of time and effort to tackle the Y2K problem within their own establishment and among organisations under their purview, a directorate officer is required to facilitate the necessary liaison and co-ordination among members of the Steering Committee, government departments and financial industries. The timetable is to complete the majority of the system rectification work by the end of 1998 and to firm up arrangements for co-ordinating industry-wide testing and contingency planning for the financial services sector as quickly as possible.
Enhancement of financial infrastructure
5. Hong Kong is one of the world's largest banking centres and securities markets. We are committed to improving Hong Kong's position as a premier financial centre by, among other things, providing state-of-the-art technology for the financial infrastructure and a well-trained and adaptable workforce. Through these measures, we expect to enhance the competitiveness of the financial services sector in Hong Kong, in terms of more professional services, reduced risk and increased efficiency. To this end, we have started and are planning further studies to examine the following issues -
- the importance of information technology to the future development of the financial markets and measures to enhance efficiency and integrity of these markets with the advent of technology; and
- the necessity and feasibility of establishing a financial services institute to provide personnel of the right calibre and equipped with appropriate training to meet the needs of Hong Kong, and to enhance the standard of quality and professionalism in financial services.
6.In respect of paragraph 5(a), we have finalised the scope of a consultancy study and will shortly engage consultants to undertake the work for us. We will study the business flow in various financial markets and focus on the strategic development of the financial technology infrastructure having regard to the global trend towards full automation and straight through processing of financial transactions. We plan to set up a steering committee to canvass the views of prominent representatives of the industry and experts on the subject.
7.In respect of paragraph 5(b), the Financial Secretary has appointed a steering committee, comprising industry representatives, academics and heads of major educational and training bodies, to oversee the study. As a first step of the study, we have commissioned a consultancy firm to examine the demand for and supply of human resource development opportunities in the financial services sector in Hong Kong. We will identify any gaps or duplications in the provision of relevant programmes and see whether there is a need and, if so, how to co-ordinate input to human resource planning for the sector. We will consider, on the basis of the outcome of the above consultancy, the need for and feasibility of setting up a Financial Services Institute, including the institutional arrangements for this.
8. The officer to fill the proposed post will take charge of all the above projects and serve as secretary to the respective steering committees. He needs to possess very good management skills to organise the work required within and outside the FSB and to complete the projects in time. Specifically, he has to co-ordinate the efforts of regulators, industry associations, outside consultants, members of the respective steering committees and relevant policy bureaux and government departments. To be an effective project co-ordinator, he has to be mature and good at public relations. This is particularly important in the Y2K project given the immutable deadline at the turn of the century and the considerable number of parties involved in industry-wide testing and contingency planning. The officer will also need to attend overseas conferences from time to time to brief the international community on what the financial services sector in Hong Kong has done or plans to do to achieve Y2K compliance.
9. The two financial infrastructure projects, on the other hand, require a strategic overview on the part of the officer of the Hong Kong's competitive edge in the longer term vis-a-vis other major international financial centres. He needs to have a good grasp of the issues involved and a high level of liaison skills in order to support effectively the work of the steering committees and to optimise the contributions made by the consultants and members of the steering committees.
Need of the AOSGC Post
|10. Having regard to the maturity, experience and administrative ability expected of the officer in charge of the various projects and the task-specific and result-oriented nature of such projects, SFS considers that an AOSGC is required for a period up to 31 March 2000 to head the newly established FI section in the Bureau, which will comprise the AOSGC, an Administrative Officer (AO), a Senior Executive Officer (SEO) and two personal secretaries. The proposed job description of the AOSGC post is at Enclosure 1. The proposed revised organization chart of FSB is at Enclosure 2.||
11. SFS has carefully considered the need to create the proposed post and would like to assure Members that the proposed new post is essential. There are currently three Principal Assistant Secretary (PAS) posts underpinning the Deputy Secretary for Financial Services. These three officers have full schedules of duties and have no spare capacity to absorb the additional duties. We set out at Enclosure 3
description of the work of the three PASs, namely PAS(Banking & Monetary), PAS(Companies) and PAS(Securities). We require urgently the supernumerary AOSGC post to help ensure as far as possible that the financial services sector as a whole is ready for Y2K. We need to take forward our work in this respect as quickly as possible as the deadline for it is immutable. Looking beyond the current economic turmoil and the immediate future, it is timely for us to consider how best to strengthen the financial infrastructure of Hong Kong. The two projects mentioned in paragraph 5 above will be important ground work for improvements in our competitiveness vis-a-vis other international financial centres in the longer term.
12. The additional notional annual salary cost of this proposal at MID-POINT is -
|$||No. of Post
|New supernumerary post||1,443,000||1
The additional full annual average staff cost of the proposed post, including salaries and staff on-cost, is $2,502,252. In addition, the proposal will necessitate the creation of four non-directorate officer posts, namely, one AO, one SEO, one Personal Secretary I and one Personal Secretary II, at a notional annual mid-point salary cost of $1,856,040 and the full annual average staff cost of $2,624,928. These posts will also lapse on 1 April 2000. We have included sufficient provision in the 1998-99 Estimates to meet the cost of this proposal.
13. In May 1998, we created under delegated authority a supernumerary AOSGC post for up to six months to head the FI section and to kick start the various projects to tackle the Y2K problem and to enhance the financial infrastructure of Hong Kong.
CIVIL SERVICE BUREAU COMMENTS
14. Civil Service Bureau agrees that the creation of a supernumerary post at AOSGC level is appropriate having regard to the nature and level of responsibilities.
ADVICE ON THE STANDING COMMITTEE ON DIRECTORATE SALARIES AND CONDITIONS OF SERVICE
15. As we propose to create the AOSGC post on a supernumerary basis, we will report its creation, if approved, to the Standing Committee on Directorate Salaries and Conditions of Service in accordance with the agreed procedure.
Financial Services Bureau
Enclosure 1 to EC(98-99)7
Job Description of the Proposed Administrative Officer Staff Grade C Post
Principal Assistant Secretary (Financial Infrastructure)
To be responsible to Deputy Secretary for Financial Services for -
- co-ordinating government, regulators and industry efforts in enhancing year 2000 readiness of computer systems and networks in the financial services sector, particularly in respect of industry-wide testing and contingency planning;
- planning, managing and overseeing studies to enhance the financial technology infrastructure of Hong Kong;
- managing and overseeing studies on human resources development opportunities in the financial services sector in Hong Kong and on the need for and feasibility of the establishment of a Financial Services Institute;
- servicing the steering committees set up to provide a steer for the work in items 1 to 3 above respectively; and
- co-ordinating any other new initiatives to enhance the competitiveness of the financial services sector in Hong Kong.
Enclosure 3 to EC(98-99)7
Description of the work of PAS(Banking & Monetary),
PAS(Companies) and PAS(Securities)
1The Y2K problem arises from the past practice adopted by the information technology industry of referring to the year by its last two digits (e.g. "98" to mean "1998") in the design of computer systems. The use of the two-digit approach was mainly to economise on the use of computer storage and processing power which were relatively expensive in the old days. The Y2K problem generally refers to computers or systems with date-coding chips being unable to correctly interpret dates from and including Y2K. The systems may continue to function with errors or misleading information, disrupt other related systems or cause total system failure.
- Principal Assistant Secretary (PAS) (Banking & Monetary) is heavily involved in the necessary policy and legislative matters in connection with banking and the Hong Kong Monetary Authority, international financial forum such as the Organisation for Economic Co-operation and Development, Asia Pacific Economic Co-operation and International Monetary Fund meetings, credit rating matters, development of the debt market, and Government's effort in tackling money laundering.
- PAS(Companies) is heavily involved in a number of legislative amendments and regular review relating to corporate rescue, the Companies Ordinance, companies winding up provisions and the Bankruptcy Ordinance. PAS(Companies) is also responsible for the housekeeping of two departments and liaison with the Hong Kong Society of Accountants, and has to attend to World Trade Organization matters relating to financial services.
- PAS(Securities) is fully occupied by the implementation of the recommendations of a series of improvement measures contained in the Report on Financial Market Review published in April 1998 as well as the follow-up work on the 30-point programme announced recently by the Financial Secretary to strengthen the discipline and order of the securities and futures markets. In parallel, PAS(Securities) will also have to continue the house-keeping functions in respect of the Securities and Futures Commission, the Stock Exchange of Hong Kong, the Hong Kong Futures Exchange and the Hong Kong Securities Clearing Company, and the processing of the Composite Securities and Futures Bill which is aimed to be introduced into the Legislative Council within the 1998/99 legislative session.
2 Membership of the Steering Committee comprises representatives from the Securities and Futures Commission, the Stock Exchange of Hong Kong, the Hong Kong Futures Exchange, the Hong Kong Securities Clearing Company, the Hong Kong Association of Banks, the Hong Kong Monetary Authority, the Hong Kong Interbank Clearing Limited, the Information Technology and Broadcasting Bureau and the Office of the Commissioner of Insurance.