6.
The review in itself could not, of course,
influence the immediate course of events caused by the major faults already obvious
already obvious in some parts of
the financial system. Close examination of banks
and deposit-taking companies in 1985 revealed a number to be facing serious difficulties. In June,
1985, in the course of a most detailed examination,
the Overseas Trust Bank declared itself to be
insolvent leading to the Government taking over the
bank and its subsidiary, the Hongkong Industrial and
Commercial Bank. This failure amplified the diffi-
culties of other local banks so that by the end of
1985, the Commissioner of Banking had a number of
local banks and deposit-taking companies under his
intensive care, with some 37 deposit-taking
companies having their registrations revoked during
the year. (Two other registered deposit-taking companies were upgraded to licensed status).
7.
In the meantime during 1985, preparation
of the new banking legislation had been generally
completed with the utmost co-operation being
received from banks, deposit-taking companies,
auditors and legal advisers. The year under review,
1986, thus became a year when the main tasks of the
Commissioner were to maintain stability against a
somewhat disordered background, to carry through the
new banking legislation and to prepare for the
changes necessary under the new approach and legislation regarding prudential supervision.
4