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THE ECONOMY
Since 1981, deposit-taking institutions in Hong Kong have been classified into three separate groups, namely licensed banks, licensed deposit-taking companies and registered. deposit-taking companies.
Banking licences are granted at the discretion of the Governor in Council in accordance with the provisions of the Banking Ordinance. At present, in order to be considered for a banking licence, a local company (that is, a company incorporated in Hong Kong and predominantly beneficially owned by Hong Kong interests) must have a paid-up capital of at least $100 million, must have been in the business of taking deposits from and granting credit to the public for at least ten 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 have total assets (net of contra items) of at least US$14,000 million (unless it is of exceptionally high standing and unless banks from its country of incorporation are under-represented in Hong Kong), and its country of incorporation must exercise an adequate form of prudential supervision on banks and offer some acceptable form of reciprocity to banks from Hong Kong.
At the end of 1988, there were 158 licensed banks in Hong Kong, 35 of which were locally incorporated. They maintained a total of 1 397 offices in Hong Kong. In addition, there were 148 representative offices of foreign banks. The total deposit liabilities of all the licensed banks to customers at the end of the year was $779 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 licensing 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.
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 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 1988, there were 35 licensed deposit-taking companies, and their total deposit liabilities to customers was $31 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 not less than $100,000 with a term to maturity of at least three months. At the end of 1988, there were 216 registered deposit-taking companies, and their total deposit liabilities to customers was $36 billion.
Following a review of this three-tier system in consultation with the industry, the Commissioner of Banking is formulating a series of proposed changes to the system.
Apart from deposit-taking, conventional lending and foreign exchange dealings, banks and deposit-taking companies in Hong Kong are increasingly diversifying into other