HONG KONG LEGISLATIVE COUNCIL-3 February 1988
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r with
feels that they are in this position that they should talk the matter their banks. A committee has been established to examine these difficult cases.
MR. LI: Sir, a speculator looking for an immediate capital gain of at least 10 per cent. Will the Government confirm that a negative interest rate will have to be at least 10 per cent per quarter or 40 per cent per annum to be effective? And even if this rate is applied, as in Switzerland, it was not effective.
FINANCIAL SECRETARY: Sir, I think it would be wrong for me to speculate, if I could use that word in a different sense, on what negative interest rate would be adopted. But, as I said at the end of my answer to the principal question, it seems that intelligent speculators have already taken account of the resolve of this Government to maintain the present rate. The rate, as I said earlier on, is now happily at around the 7.80 mark.
HIS EXCELLENCY THE PRESIDENT: I have five more people who wish to ask supplementaries. I have no wish to limit discussion but at some point I am going to draw a line. Mr. Martin LEE.
MR. MARTIN LEE: Sir, were these rules made by the Hong Kong Association of Banks entirely out of their own volition or were they made at the directive, or, alternatively, with the gentle persuasion of the Financial Secretary?
FINANCIAL SECRETARY: Mr. LEE knows me well enough to know that I rarely direct. I think gentle persuasion is perhaps the better term.
MR. CHAM: Sir, in the event of depositors deciding to maintain their Hong Kong dollars in cash by withdrawing from the banks and not keep them in the bank balances to avoid the negative rates, would this cause any ill effects on our money supply or our credit markets in Hong Kong?
FINANCIAL SECRETARY: Sir, we are getting into quite difficult and technical areas. I think the short answer to Mr. Kim CHAM is 'no', it would not cause difficulties, and the question of large withdrawals of cash has in fact been addressed by the association and the necessary arrangements are in place. My understanding is that the two note-issuing banks have already made arrange- ments for adequate cash to be available at short notice to meet any demand.
MR. DESMOND LEE: Sir, since there is no statutory self-regulatory body for deposit-taking companies, how legally enforcible will such negative interest rates be for the deposit-taking companies?
FINANCIAL SECRETARY: Sir, the Deposit-taking Companies Association announced yesterday that they supported the introduction of negative interest rates as a measure to curb speculative activities on a stronger Hong Kong dollar