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services, and so if we had not imposed such severe restrictions on the issue of banking licences, this growth in fringe organisations would not have been so great. Some in fact were banks in all but name exploiting this loophole in
the law.
10.
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Thus these finance companies were competing with licensed banks for business and there was argument as to whether such competition was beneficial to Hong Kong, particularly when finance companies were not supervised by the Government, and were able to operate without the constraints of liquidity ratios and the like. The situation was further complicated by doubts about interpretation of the definition of "banking business" as originally worded in the 1964 Banking Ordinance. The banks or at least some of them, argued that the intention behind the definition of 'banking business' in the 1964 Ordinance was to confine all deposits shorter than 3 months to licensed banks. It is not difficult for the layman to see how they came to this conclusion. However, some finance companies, having taken legal advice, began to take deposits repayable within three months from corporate lenders and this soon spread. It was not surprising that complaints from the banks that finance companies were encroaching unfairly to their preserve began to be made, and that as inroads into the business which the banks believed was reserved to them increased that the banks' complaints became more vociferous. On the other hand, the finance companies asserted that their competition in the disputed area was beneficial to Hong Kong and a necessary
/condition...