CONFIDENTIAL
Robert Fleming and Jardine Matheson (now legally incorporated in Bermuda, although its headquarters and principal operations are in Hong Kong).
Before ExCo considered Jardine Fleming and Co's application for a banking licence in February 1989, the Hong Kong authorities recommended that the Hong Kong ownership criterion should be interpreted to mean "predominantly beneficially owned by interests headquartered in Hong Kong". If the licensing criterion had been simplified in this way, it would have allowed Jardine Fleming and Co to qualify for a full banking licence.
When ExCo considered Jardine Fleming's application for a banking licence in February 1989, they concluded that unless the licensing criteria were changed, granting a full banking licence to Jardine Fleming under the criteria for a local institution would be impossible to justify pubicly, particularly in view of the publicity given to Jardine Matheson's decision to leave Hong Kong in 1984 to be re-incoroporated in Bermuda. Consequently ExCo decided that Jardine Fleming's application should not be determined until a thorough review of the licensing criteria had been completed. That review was completed in January this year.
When ExCo re-considered this question in the light of the review, they decided the time was not ripe to make any changes to the criteria until it could be seen how the new "three-tier" system of authorisation worked out in practice. For some years there have been three categories of authorisation granted for institutions to carry on a deposit taking business in Hong Kong. Each category confers different powers to take deposits, culminating in a full banking licence where these powers are unrestricted. Until a recent change to this "three-tier" system in February this year, only those with a full banking licence were allowed to describe themselves as banks. Under the previous system, the middle category of institutions, of which Jardine Fleming is one, were known as licenced deposit-taking companies. Following an amendment to the Banking Ordinance in February, however, institutions in this category are now designated restricted licence banks and are able to refer to themselves as merchant banks. The main reason for this change was to help institutions such as Jardine Fleming to enhance their international status with a view to improving their access to markets both in Hong Kong and overseas.
Jardine Fleming's application made it clear that they were seeking a banking licence in order to confer enhanced status on the group as a whole, rather than to develop as a commercial bank, for which they do not have the expertise. In other words they demonstrated no clear need for the wider deposit-taking power which a full banking licence would have conferred.
CONFIDENTIAL