This is the first time that a zero coupon bond product is offered to the retail public in Hong Kong. It is also the first time we are issuing retail bond with a ten-year tenor. "Zero coupon" bonds are intended for investors who wish to save up funds for longer-term use. They do not need the cash flow from the interest payments on conventional bonds, but they would wish to save up the principal and interest for future retirement or children’s education. By investing around $ in this zero coupon bond, the investor will receive $ after ten years. If investors should find a need to sell the bonds prior to maturity, they are free to do so. We have a market making arrangement with our placing banks to provide quotes to buy such bonds to ensure secondary market liquidity. Apart from the zero coupon bond, the HKMC is also issuing two-year US Dollar retail bond, following our successful, inaugural issue of retail US Dollar bond last year. We are now offering two-year retail bond denominated in US Dollar as well as in Hong Kong dollar to provide more investor choice. Out of the total deposit base of over $ trillion in our banking sector, about one-third are in US Dollars. We believe there should be good demand for these two-year notes, especially given the recent pause in interest rate hike by the US Federal Reserve. To sum up, the retail bonds offered today will provide the general public with an additional, relatively safe investment vehicle.
Across all these areas, these judgments have to be translated into appropriate limits, an appropriate capital cushion above the regulatory minimum and a robust liquidity management strategy. These thresholds need to be calibrated to withstand more adverse conditions than we’ve seen in the recent past. The major institutions seem in general to be managed so that they are in a stronger position to withstand the shocks of the nature and magnitude of the last few decades of experience. The apparent increase in the strength and resilience of the U.S. financial system has contributed significantly to the improvement in the overall performance of the U.S. economy of the past 20 years. As the challenges of risk management become more demanding, it is important that supervisors and those charged with managing the major financial institutions make the investments necessary to stay abreast of the changing frontier of risk management challenges and a potentially more uncertain future. Thank you. 3/3