They reached a climax in the sophisticated assault of early August, which mobilised massive resources in an attempt to play off the currency board system against the stock and futures markets. This attack was unprecedented in scale and organisation. It posed a grave threat to the stability and integrity of our whole financial system. Decisive, albeit controversial, action by the Hong Kong SAR Government ensured that this threat was averted. In combination with other factors, this action helped to ensure stability in our markets for the remainder of the year and beyond. The HKMA’s role in the August operation is well known to Members. For my part, I am fully convinced that what we did was necessary and right for Hong Kong, and that it delivered our financial system from the brink of a profound and very dangerous crisis. The portfolio of shares acquired by the  1  BIS Review 48/1999  Government as a result of operations has been placed under the management of EFIL, which will draw up plans for disposing the majority of them in a gradual and orderly manner. But so much has been said about this subject that the impression is sometimes given that that is all that the HKMA did in 1998. This is a pity, because we have other solid achievements to place on record. Among the achievements worth singling out are: •  Effective supervision of the banking system to ensure stability and soundness during a period of intense regional financial crisis and domestic slowdown.
•  A growth of 27.5% in the accumulated surplus of the Exchange Fund during the year, or 15% if the gains from the equity portfolio acquired in August are excluded. •  Continuing currency stability, within the framework of the linked exchange rate system, against unprecedented speculative attacks, and during a year of currency instability in much of the rest of the region. •  Substantial improvements to the currency board system, which have made it more resilient, more transparent, and less vulnerable to manipulation than it was before. •  Increased involvement in regional and global initiatives to promote Hong Kong as an international financial centre and to seek action to repair defects in the international financial architecture. Progress in this field has been slow, but not for lack of any advocacy on Hong Kong’s part. The three broad mandates of the Hong Kong Monetary Authority are to maintain currency stability, to promote the safety and stability of the banking system, and to enhance the efficiency, integrity and development of the financial system. I think that the HKMA can justifiably claim that it has successfully delivered on all of these mandates during 1998, and in the face of considerable difficulties. Accountability and transparency Monetary and banking stability is, of course, the result of efforts by the whole of the financial sector, and not just the work of the HKMA. It also depends on international faith in the integrity of our system, and, equally important, on the confidence of the community of Hong Kong.