HONG KONG LEGISLATIVE
COUNCIL
19 July 1989
香港立法局—————————一九八九年七月十九日
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taking companies has already been increased from $10 million to $25 million as from 10 March 1989. To reflect the additional status and privileges of the restricted licence banks and taking into acccount inflation over the past few years, clause 12 requires these institutions to have a paid-up capital of $100 million as against the present requirement of $75 million for licensed deposit- taking companies. Existing licensed deposit-taking companies will have a grace period of two years from 10 March 1989 to comply with the new requirement. Consequent upon this increase, clause 7 amends section 18 to raise the minimum capital level for licensed banks from $100 million to $150 million to reflect the higher capital requirement appropriate to licensed banks.
Power to obtain information
Section 63 of the Banking Ordinance empowers the Commissioner of Banking to require information from authorized institutions if such information is "necessary for the proper understanding of the financial position of the institution". This is considered to be too restrictive. To enable the commissioner to discharge his statutory responsibilities effectively, he needs to have relatively unfettered power to obtain information from authorized institutions and their related companies. Clause 26(a) therefore amends section 63(2) to empower the commissioner to require any authorized institution or its subsidiaries to submit to him information that may reasonably be required for the exercise of his functions under the Ordinance.
Maximum exposure of an authorized institution
Section 81(1)(b)(i) of the Banking Ordinance provides that the financial exposure of an authorized institution to two or more companies which are subsidiaries of the same holding company shall not exceed an amount equivalent to 25% of the paid-up capital and reserves of the institution. Since the term "the same holding company" in the section includes authorized institutions, the limitation on financial exposure contained in the section therefore applies to exposure of authorized institutions to their own subsidiaries. It follows from this that a bank cannot lend more than 25% of its own capital to its own subsidiaries, even though those are subject to the commissioner's consolidated supervision. To remove this anomaly, clause 33 amends section 81 to provide that an authorized institution may be exempted from section 81 (1)(b)(i) where the institution is itself the controller of the subsidiaries concerned, but that such an exemption shall be subject to the prior approval of the commissioner and to such conditions as he may think proper to attach thereto. This discretion is intended to be used
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