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FINANCIAL SYSTEM AND ECONOMY
Hong Kong has a number of institutional features which, together, make it probably unique as a financial centre. There is a low degree of specialisation, especially among the commercial banks, so that there is, for instance, only one small institution concerned only with granting mortgage finance, while none are established solely to gather savings deposits (these functions are instead normally carried out by commercial banks). There is no central bank or central monetary authority; such of the tasks of a central bank as arise in Hong Kong are carried out by the Monetary Affairs Branch of the Government Secretariat, operating as necessary through the Hong Kong Government Exchange Fund and through one or another of its commercial bankers. There is now no marketable government debt, and the total public debt is extremely low. There is a well-developed foreign exchange market, with no exchange control of any sort.
Banking Structure and Non-bank Financial Services
Banks are licensed in Hong Kong under the Banking Ordinance. The licensing authority is the Governor in Council. In March, 1978, a moratorium on the issue of banking licences (which had been in force since 1965) was eased in respect of applications from foreign banks which met a number of criteria relating to their size and background, although the govern- ment reserved the right not to grant a licence even when an applicant met all the criteria.
The grant of further licences was suspended again in August, 1979, after 41 banks from 12 countries had been granted licences, so raising the number of licensed banks in Hong Kong from 74, as of March, 1978, to 115 in August, 1979. Eight of these banks did not begin to operate under their new licences until 1980, while two banks were expected to begin to operate in 1981. At the end of 1980, the 113 licensed banks had between them 1,146 banking offices. In addtion there were 108 representative offices of foreign banks.
Finance companies and other non-bank financial institutions which take deposits from the public but do not conduct banking business (as defined in the Banking Ordinance) are required to register under the Deposit-taking Companies Ordinance. At the end of 1980, 302 such companies were registered. Most of these companies are incorporated in Hong Kong, but many are owned by interests outside Hong Kong, including foreign banks. From January, 1980, deposit-taking companies have been required to meet minimum liquidity requirements which are broadly similar in approach to those which have applied to licensed banks since 1965.
Licensed banks and registered deposit-taking companies are subject to the prudential supervision of the Commissioner of Banking, who is at the same time the Commissioner of Deposit-taking Companies. In addition, Hong Kong branches of banks and deposit-taking companies incorporated outside Hong Kong are subject to the prudential supervision of the banking authorities in their countries of origin. Work progressed during the year on extending and improving the system of prudential control and supervision applied to banks and deposit-taking companies in Hong Kong.
The government took steps to incorporate by statute the trade association for all licensed banks, and to require all banks to be members of the association. The Hong Kong Associa- tion of Banks Bill was published in November, 1980. The government also encouraged the formation of an association to bring together all registered deposit-taking companies.
Under the Monetary Statistics Ordinance, enacted in July, 1980, the government was empowered to collect detailed statistics from all banks and deposit-taking companies with a view to measuring developments in the monetary sector of the economy more effectively. The statistics previously available had not proved adequate for an increasingly complex financial system.