Hong Kong Promotes Chan to Be Chief Banker

By JONATHAN CHENG and CHESTER YUNG

HONG KONG -- The Hong Kong government appointed Norman Chan as chief executive of the Hong Kong Monetary Authority, elevating a top political aide and veteran of the agency to run the city's de facto central bank after a year of financial stress.

Mr. Chan, who will succeed longtime Chief Executive Joseph Yam on Oct. 1, said Friday that the most important task will be to maintain the stability of Hong Kong's monetary and banking systems, and the functioning of credit markets.

As head of the authority, which also serves as the city's banking regulator, Mr. Chan said he would aim to "strike a very delicate balance" between investor protection and financial innovation.

Mr. Chan, 55 years old, worked 12 years at the authority and was deputy chief executive when he left to join Standard Chartered PLC as Asia vice chairman in November 2005. He took over as director of the office of Hong Kong's chief executive two years later.

Mr. Yam turns 61 in September and has headed the authority since it was founded in 1993.

Mr. Chan's appointment had been expected. The Hong Kong government said Friday that Mr. Chan had been shortlisted for the job earlier this year and first approached in May.

Mr. Chan won't be as well compensated as his predecessor, who earned more than US$1.5 million last year. The government said Mr. Chan's annual base salary will be six million Hong Kong dollars ($774,000), though a discretionary bonus and benefits could increase his compensation.

Mr. Yam's salary had become an issue in the Chinese territory, though Financial Secretary John Tsang denied Friday that there were any political considerations behind the salary cut.

Mr. Tsang said Mr. Chan was one of 39 candidates for the position, rebutting speculation that Mr. Chan was picked for the job because of his close relationship to Hong Kong's chief executive, Donald Tsang, who isn't related to John Tsang. Mr. Chan's tenure will be five years and is renewable when the term expires, John Tsang said.

Mr. Chan said he had no plans to change the local currency's peg to the U.S. dollar, which he said was a "cornerstone" of Hong Kong's financial success. He also highlighted Hong Kong's role in the internationalization of mainland China's yuan. The development of Hong Kong's yuan-services business is a focus for the monetary authority, he said.

"It is crucial we enhance the competitiveness of Hong Kong's financial-services sector," Mr. Chan said.

The authority has come under attack recently for not doing enough to protect investors in structured-finance products. Thousands of people in Hong Kong lost money investing in minibonds backed by the now-defunct Lehman Brothers Holdings Inc. and distributed by a number of Hong Kong banks.

"The Lehman-minibond incident reflects a need to tighten regulation," said Ronny Tong, a Hong Kong legislator.

—Aries Poon contributed to this article.

Write to Jonathan Cheng at jonathan.cheng@wsj.com and Chester Yung at chester.yung@dowjones.com