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APR 03 '86 16:41 GIS HK
P.11
would certainly be blamed for incompetence if it had failed. But as knowledgeable Members of the Council have commented, there remain the proper questions of whether our reserves are sufficient and why did the fires start in the first place. I have already spoken about the scope of the Exchange Fund. As to the second question, which is very proper and very difficult to answer, there can be no sure reply beyond the passage of history, a superfluity of DTC's, the ending of the bank moratorium, clear instances of malfeasance and of corruption, harsh competition with larger banks, standards of auditing which required improvement, the extraordinary last four years including political uncertainty, the lack of control of the money supply before 1983, the property bust, various recent developing problems in South East Asia, and no doubt a fair degree of incompetent bank management. Clearly I cannot think that Government supervision has been immaculate because otherwise we would not be considering with urgency a new Banking Bill the outcome of two years work and extensive consultation with all concerned.
23.
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I hope that we are now out of the wood. Goodness knows we have worked hard enough. But clearly I can make no promises. You all must judge the wisdom of
what we have done and the success which we have achieved.
Do please think what the alternative scenarios might have been. The holding of large reserves would be purposeless if the economy had been turned into a desert by obstinate refusal to use those very reserves which we had prudently made available for just such a purpose.
24.
As it is we have not followed a hand to mouth
policy confined to saving banks by the use of the Exchange Fund. We have been dealing at the same time with cause, prevention, and cure. Where the Commissioner has detected weakness he has co-operated with managements to nurse their banks through difficult times. Where crises have
10-