Macao SAR Central Bank Statement

Author: IFLR Correspondent | Published: 24 Sep 2019
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The year 2019 marks the 20th anniversary of Macao's return to its motherland. Over the past two decades (1999-2018), the Macao Special Administrative Region (MSAR) has witnessed notable economic expansion, with an annual average real GDP growth exceeding 7%. According to the World Bank's latest statistics, the MSAR's GDP per capita ranks among the world's highest. At end-2018, total assets of the local financial sector exceeded $230 billion, equivalent to 13 times the level at end-1999.

Alongside the real sector's progressive development, the MSAR's financial sector accomplished remarkable results in 2018. As a dominant segment of the financial industry, local banks achieved record-high operating profits, growing for the 10th year, while total assets expanded for the 17th consecutive year. At end-2018, the capital adequacy ratio (CAR) stood at 14.8%, while the non-performing loan (NPL) ratio was merely 0.2%. Meanwhile, the insurance sector increased its assets, with improvements in loss ratio and notable profit growth. The solvency ratio of insurance companies remained sufficient, staying well above the statutory requirement.

In addition to its supervisory role, the Monetary Authority of Macao (AMCM) stepped up its efforts to create a business-friendly environment for the financial sector. Enactments of relevant legalisation were expedited in 2018. The 'Legal Regime of Financial Leasing Companies' and the 'Legal Regime of Tax Benefit Scheme for Financial Leasing' entered into force in April 2019. They are expected to attract well-established financial institutions from outside Macao to set up their operations in the MSAR, which will spur the development of the financial leasing business. Meanwhile, to encourage development in wealth management activities, the AMCM commissioned legal experts to explore the possibility of introducing a trust law in the MSAR and to start drafting guidelines for the issuance, underwriting and custody of bonds.

New activities loomed in the local financial landscape as major financial institutions from Mainland China established footholds in the MSAR. In 2018, banks in Macao participated for the first time in the distribution of Mainland municipal bonds while the first financial institution offering financial asset trading services came into operation. In the first half of 2019, the first virtual bank commenced business in Macao. Besides affirming the strategic efforts of the MSAR Government in fostering economic diversification over the past few years, all these developments have injected fresh catalysts into the local financial industry.

Looking forward, uncertainties continue to cloud the global economy. To cope with the escalating risk and heightening volatility in the financial markets, the MSAR, as a small and highly open economy, should remain highly vigilant and enhance the resilience of its financial system via precautionary and prudent measures. In accordance with the MSAR's designated role in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) and the MSAR's Five-Year Development Plan, the AMCM will continue to proactively promote the sustainable development of the financial sector while facilitating the industry to seize the enormous opportunities afforded by the Belt and Road Initiative (BRI) and GBA integration.