Face to Face with Eddie Yue, Chief Executive of the Hong Kong Monetary Authority

No stranger to challenges, whether it was while grasping complex financial jargon on the job when he first started or now confronting financial crises and a pandemic as a leader, Eddie Yue, Chief Executive of the Hong Kong Monetary Authority (HKMA) is as determined as ever to maintain Hong Kong’s financial stability.

Challenging Yet Rewarding Times

Yue’s first step into the financial world was when he joined the Office of the Exchange Fund in 1991 as part of his rotation while working as an administrative officer for the Hong Kong government. Unequipped with sufficient financial knowledge, he struggled with note-taking and learned the tricks of the trade on the job, supplemented with a Master’s degree in Economics. When the HKMA was first established in 1993, Yue was one of its founding members and has been part of what is the city’s central banking institution, since then.

Having been a part of the HKMA for more than two decades, Yue finds his work “professional and challenging.” The task of maintaining Hong Kong’s financial stability is a mammoth one and one that sits at the centre of the city’s global identity. “You can imagine that if Hong Kong’s financial system becomes unstable, there can be disastrous consequences,” shares Yue. In 1998, Yue was an administrative assistant to the then Chief Executive of the HKMA, supporting the team from the backend. Today, more than twenty years later, he still vividly remembers the 1998 financial crisis and how his team handled it. “At that time, the financial market was in panic, and I witnessed the team tackling the crises in the stock and foreign exchange markets in an unflappable manner. This battle to defend Hong Kong’s financial stability was an eye-opening experience for me,” he recalls.

Then, came another financial crisis in 2008. Fighting from the front line this time as Deputy Chief Executive, Yue was heavily involved in working out strategic responses to the crisis. “This time, I deeply felt the importance of teamwork. The morale of the team was very high, and we worked every day and night with only one common goal: to solve the crisis,” shares Yue. Besides tackling the financial crisis, Yue also drove major policies and initiatives relating to reserves management, research, external affairs, and market development during his tenure as Deputy Chief Executive. He also played an active role in enhancing the Linked Exchange Rate System.

When Yue was appointed Chief Executive of the HKMA on 1 October 2019, the challenges did not subside. During that time, Hong Kong was in a particularly complicated situation. “There were challenges on multiple fronts including social incidents, tensions in Sino-US relations, the outbreak of the pandemic and the subsequent economic downturn,” recalls Yue. Suddenly, Hong Kong and its political, social, and financial stability were under the spotlight globally. Yue’s part of the battle was maintaining public confidence in the city’s financial system, a task further complicated because of the widespread dissemination of social media rumours, fueling pessimism towards the same. “I still remember that when we were engaged in the battle on “social media rumours” during the long weekend in early October 2019, our entire team closely monitored the discussions on different social media platforms and we actively discussed in our chat group the strategies to counter rumours around the clock,” shares Yue. “We spotted the unfounded rumours about financial stability on the Internet and clarified them quickly to prevent the wrong and misleading information from spreading,” he adds.

Teamwork and keeping spirits high came in handy again. Assessing social media trends and analysing the impact of those rumours required insight from younger members of the team and the senior management of the HKMA was not shy to seek advice from them. “At that time, the senior management of the HKMA including myself, consulted young colleagues humbly to listen to their thoughts on public sentiment towards the rumours, in order to assess their trend and impact so as to formulate a targeted response strategy,” says Yue. “This ‘virtual battle’ made me deeply feel the importance of a team working towards a common goal, and the team’s quick response and flexibility also impressed me a lot,” he adds. Despite the difficulties, Yue recalls the HKMA having the highest morale, a testimony to the institution’s resilience and adaptability.

While there have been challenging times for Yue, he has emerged stronger and wiser. The ups and downs have provided him with some solid takeaways. These include planning ahead and being prepared for danger when things are going well. “Even with a solid foundation, we must also make emergency plans ahead as unexpected events happen all the time,” he shares. Also, avoiding impulsive reactions to a challenge and appreciating that “good things take time” has been another key lesson for him. “Things can only be solved when we have a calm and clear mind. As long as the team works together, the challenge can always be resolved gradually,” he explains.

Yue’s experiences have also shaped his forward-thinking approach for the future, allowing him to seize new opportunities for development that can take Hong Kong’s financial system to new heights. A resilient financial system needs to respond to ever changing socio-economic factors and Yue is well aware of the need to capture opportunities swiftly as they arise in order for Hong Kong to stay ahead of the curve. Looking outward towards the future, Yue believes that the HKMA can enhance Hong Kong’s position by delving deeply into and maximising on the era’s hottest topic: financial technology.

Financial Technology

Will financial technology replace banks one day? As the head of the city’s central banking institution, Yue does not think so. In fact, he believes technology will make banking better. This belief is at the heart of the HKMA’s initiatives in the area of financial technology, or fintech. One such initiative is the Commercial Data Interchange (CDI). “Let me give you an example of what CDI could deliver. A family-run noodle shop which has problems getting bank credit can now choose to allow its bank to access historical turnover data from its point of sale terminals. With access to this data, and by using AI tools, the bank should be able to make an accurate forecast for the noodle shop’s sales. That means it can make a credit decision without having to first ask the owner for loan collateral. Hopefully, the noodle shop is successful and its sales rises above the projections in the bank’s model. Then its credit limit can automatically be increased by an appropriate amount.” Yue explains.

In essence, CDI’s aim is to allow data owners to share their digital footprint with banks more seamlessly in order to be able to make the most out of various financial services such as loans and credit assessments. “To begin with, valuable and rich data are scattered across different sectors and entities. It’s often hard to access these data – and it’s hard to verify their validity,” Yue explains. CDI aims to solve this issue by enabling customers and bankers to give and collect holistic information via a single connection on an interoperable, consent-based platform. “Small importers and exporters might also benefit. Through CDI, they could authorise trade servicing platforms to allow their banks to access reliable trading data. This should help banks understand their customers’ trade counterparties, which can reduce money laundering risk. Because of this, the trading companies’ access to financing should improve, and their cost of borrowing should fall,” Yue adds. Such a platform containing highly sensitive data crucially needs to abide by the principles of customer consent and data security. “The platform will be subject to rigorous governance that will include consumer protection measures,” Yue reassures.

Besides enriching banking services within the city, Yue also has cross-border and international initiatives in place. The Multiple Central Bank Digital Currency (m-CBDC) Bridge Project, in collaboration with three other central banks in Asia and supported by the Bank for International Settlements Innovation Hub, is a digital currency project for cross-border payments. “As a leading international financial centre, Hong Kong should always be looking to enhance cross-border banking, too. As any of you who have ever made an international remittance will know, the correspondent banking system we have today is far from perfect. In fact, it’s inefficient, costly and opaque,” explains Yue. “The central banking community understands these issues. So the Bank for International Settlements has set up a specific Task Force to study how we can apply technology to improve cross-border banking. The HKMA is one of the leading central banks in this initiative,” he adds. The block-chain based initiative has been joined by the Bank of Thailand, the Central Bank of the United Arab Emirates and the Digital Currency Institute of the People’s Bank of China and aims to make cross-border payments more efficient. “We have already developed a Proof-of-Concept prototype that enables real-time cross-border funds transfers on a peer-to-peer basis. In the next phase, we are exploring business use cases such as international trade settlement and capital market transactions. Our ultimate objective is to alleviate the long standing pain points in cross-border fund transfers,” shares Yue.

Yue believes these initiatives in financial technology are just the beginning of a long road. While Hong Kong already has a prominent position in the global fintech scene, he believes further digital transformation of banking services allow the provision of better and more diverse banking services, promotes financial inclusion and brings fair competition to the table.

Green Finance and China-Hong Kong Gateway

Besides financial technology, initiatives and developments in the area of green and sustainable finance and Mainland opportunities will also be vital. “Hong Kong has long been the gateway to connect China with the international financial markets. China’s economic growth and wealth generation, as well as global investors’ increasing appetite for RMB-denominated assets will create a bigger role for Hong Kong. The HKMA will continuously work towards new policy breakthroughs to seize the opportunities ahead,” he explains. On the topic of green and sustainable finance, Yue is keen to go beyond rhetoric and genuinely aspires to build a better and more sustainable world for future generations. “Sustainable finance is more than just a tagline. As an international financial centre, Hong Kong can play a critical role in the region’s transition towards net-zero carbon emissions and can make meaningful contributions to the global efforts in combating climate change. The HKMA is determined to be at the forefront of such efforts by taking actions such as integrating sustainability into our Exchange Fund investments and banking system, supporting the dedicated Government Green Bond Programme etc. We are also actively co-operating with other financial regulators and participating in international forums to support global development of green and sustainable finance,” he shares.

The Legal Industry and the HKMA

A firm believer in teamwork, Yue credits the legal industry in the role they have played in building up and protecting Hong Kong’s financial system. Holding the legal system in high regards, he is particularly impressed by the independence of the Judiciary and the progressive regulatory environment which provides a fair and predictable marketplace for financial institutions to function and flourish in. “The legal profession has been a critical part of ensuring our market infrastructure, legal framework and regulatory regime and tax system are business-friendly, forwarding-looking and competitive,” he shares. Despite Hong Kong’s solidified position in the global financial scene, Yue believes improvements, refinements, and fine-tuning, in collaboration with the legal industry, should always be made. “We are never satisfied with what we achieve, instead, we keep reviewing and undertaking refinements to make us more competitive and attractive for a wide range of financial services. I hope we can all work together as we did in the past to further strengthen Hong Kong’s international financial centre status,” he shares.

Parting Words

Yue is proud of Hong Kong’s resilience when faced with numerous challenges in recent times – whether it was the social incidents, the pandemic or Sino-US trade tensions. However, relying on his forward-thinking instincts, he believes planning ahead, creating buffers and grabbing new opportunities are what will be a key differentiator between financial systems that thrive and those that dwindle. “As a market facilitator, the HKMA is always looking for new opportunities for our financial sector. We are constantly working to create headroom for market players to seize the opportunities,” he shares.

Despite testing times over the past few years, Yue urges the public to not relinquish what the collective effort of various individuals and institutions have built over the years. Teamwork and applying everyone’s unique expertise, with the zeal to try new things and take on new challenges, is the way forward to build an even better and more prosperous Hong Kong.