The Banks
2.
In the absence of a Central Bank or Monetary Authority, bank
notes are issued by the Hongkong and Shanghai Banking Corporation, the
Chartered Bank and the Mercantile Bank. Apart from very small
authorised fiduciary issues, the backing for the currency takes the
form of Hong Kong dollar Certificates of Indebtedness issued by the
Government's Exchange Fund as the counterpart of foreign exchange paid over by the banks (although since July 1972 as a temporary measure
because of a shortage of exchange in the market currency issues have
been made against Hong Kong dollars at par). The Hongkong Bank
dominates the banking scene in terms both of currency issue and general
banking and it also acts on occasions as lender of last resort, runs
the Clearing House and is authorised by the Financial Secretary to
intervene in the exchange market when necessary.
There are 74 registered banks in Hong Kong comprising
33 foreign banks (including the Hongkong Bank which is so defined although it is a Hong Kong registered bank), 25 local Chinese banks,
13 mainland banks and three unincorporated banks. In addition, there
are approximately 200 finance companies, both local and foreign,
including merchant banks.
Whereas registered banks are subject to the provisions of
the Banking Ordinance, including the 25% liquidity requirement, the
only restriction on the operations of finance companies is a
prohibition on the acceptance of demand deposits, a right reserved to
registered banks. It appears also that Certificates of Deposit are
not subject to the liquidity requirement whether issued by banks or
finance companies. However, even if the liquidity requirement did
apply under the terms of the present Banking Ordinance to C.D.s put
out by banks, finance companies
many of which are owned by local
banks
would not be affected.