THE ECONOMY
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Kong interests), in order to be considered for a banking licence, must have a paid-up capital of at least $100 million, have been in the business of taking deposits from and granting credit to the public for at least 10 years, and have at least $1,750 million of deposits from the public and at least $2,500 million of assets. A bank incorporated outside Hong Kong wishing to apply for a banking licence is required to satisfy a separate set of criteria: it must show total assets (net of contra items) of at least US$14,000 million, and its country of incorporation must exercise an adequate form of prudential supervision on banks and offer some acceptable form of reciprocity to banks in Hong Kong.
At the end of 1986, there were 151 licensed banks in Hong Kong, of which 32 were locally incorporated. They maintained a total of 1 386 offices in Hong Kong. In addition, there were 134 representative offices of foreign banks. The total deposit liabilities of all the licensed banks to customers at the end of the year was $491 billion.
Only licensed banks may operate current or savings accounts. They may also accept deposits of any size and any maturity from the public. The interest rate rules of the Hong Kong Association of Banks (of which all licensed banks are required under their licens- ing conditions to be members) result in the setting of maximum rates payable on bank deposits of original maturities up to 15 months less a day, with the exception of deposits of $500,000 or above with a term to maturity of less than three months, for which banks may compete freely.
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Licensed deposit-taking company status is granted at the discretion of the Financial Secretary. Licensed deposit-taking companies are required to have a minimum issued share capital of $100 million and a paid-up capital of $75 million, and to meet certain criteria regarding size, ownership and quality of management. They may also take deposits of any maturity from the public, but in amounts of not less than $500,000. There are no restrictions on the interest rates they may offer. At the end of 1986, there were 38 licensed deposit-taking companies, and their total deposit liabilities to customers was $25 billion.
The authority to register deposit-taking companies rests with the Commissioner of Banking. Since April 1981, the Commissioner has, at the direction of the Governor, restricted new registrations to companies which, as well as meeting certain basic criteria such as having a minimum paid-up capital of $10 million, are more than 50 per cent owned by banks in Hong Kong or elsewhere. Registered deposit-taking companies are restricted to taking deposits of $100,000 or above with a term to maturity of at least three months. At the end of 1986, there were 254 registered deposit-taking companies, and their total deposit liabilities to customers was $46 billion.
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The Commissioner of Banking is the authority for the prudential supervision of all deposit-taking institutions, as provided for by the Banking Ordinance. The Commissioner's Office also obtains regular returns from and sends examination teams to the overseas. branches of Hong Kong incorporated banks and deposit-taking companies (subject to the permission of the local authorities). The principles of the revised concordat issued by the Committee on Banking Regulations and Supervisory Practices, which meets regularly at Basle in Switzerland, and the principles of world-wide supervision of banking groups based in Hong Kong are accepted and practised.
Foreign Exchange, Money and Other Financial Markets
Hong Kong has a mature foreign exchange market in which the local currency and major international currencies are actively traded. Several factors have contributed to the development of the foreign exchange market. First, there are no exchange controls in Hong Kong. Second, international banks may trade through their Hong Kong offices while other