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HONG KONG LEGISLATIVE COUNCIL-3 February 1988
should er bypass this Council when the circumstances dictate that matters should be brought to this Council. But of course the Government in fact has not made these rules; the rules have been made by the Hong Kong Association of Banks in consultation with the Government and I do not think that it would have been appropriate to bring these rules to the Legislative Council.
Turning, Sir, to the first part of the question which relates to where the proceeds of negative interest rates would be paid. Mr. LEE asked whether the negative interest would be paid to the Government and, if so, is this payment not in the nature of a tax rather than a banking charge. The charge is not in the nature of a tax. The Specified Rate Rule made by the Hong Kong Association of Banks in December applies to the clearing balances of member banks. The rule contains a provision and I quote: 'The management bank shall promptly pay all amounts of interest charged pursuant to these rules to the Financial Secretary as controller of the Exchange Fund.' This, Sir, is therefore not a government levy on banks. The rule was made by the committee of the association, who have decided that the interest charge should be passed over to the Exchange Fund and I shall be very happy to receive that money for the account of the Exchange Fund, not for the purposes of general revenue. The charges levied by banks on large Hong Kong dollar balances of bank customers are, of course, for the accounts of banks and not for passing on to the Exchange Fund.
MR. JACKIE CHAN: Sir, if the banks refuse to accept offshore Hong Kong dollar deposits, then Hong Kong would cease to be a centre of free flowing capital into and out of the Territory. Apart from contravening the Joint Declaration, has the Government considered the very damaging effect to Hong Kong's position as an international financial centre?
FINANCIAL SECRETARY: Sir, there is certainly no question of any contravention of the Joint Declaration in the making of these rules. I think there is likely to be far more damage to Hong Kong as an international financial centre if our currency is subjected from time to time to the intense and, as I described it earlier, wholly unwarranted speculation.
MR. HUI: Sir, has Government considered exempting the imposition of negative interest for the Government, the Community Chest, subvented organisations, and other charitable organisations? If so, is the administration of negative interest rates going to become impossibly complicated?
FINANCIAL SECRETARY: Sir, obviously there are cases for some exemptions. The point I wish to emphasise is that we are not yet in a position in which negative interest rates are actually being implemented. Now it may be that some organisations will claim that negative interest rates should not be applied to them because they are not speculators, and obviously difficult questions of interpretation and administration will apply. I can only suggest to anyone who
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