FINANCIAL AND MONETARY AFFAIRS
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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 1989, there were 36 licensed deposit-taking companies, and their total deposit liabilities to customers was $37 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, are more than 50 per cent owned by banks in Hong Kong or elsewhere. Registered deposit-taking companies are required to have a minimum paid-up capital of $25 million. They 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 1989, there were 202 registered deposit-taking companies, and their total deposit liabilities to customers was $33 billion.
Following a review of this three-tier system, in consultation with the industry, it has been decided that a number of changes will be introduced to overcome the problems identified and further the development of the system. To give effect to these changes, the Banking (Amendment) (No. 2) Bill 1989 was introduced into the Legislative Council in July for First Reading and Commencement of Second Reading debate.
Upon the enactment of the amendment ordinance, which is expected to be in January 1990, the existing categories of licensed deposit-taking company and registered deposit- taking company will be replaced by the categories of restricted licence bank and deposit- taking company respectively. The licensed banks' category will remain essentially unchanged. Restricted licence banks will have a greater scope in the use of business descriptions than the category of licensed deposit-taking companies which they will replace. They will be able to use the word 'bank' in describing their business in promotional literature and advertisements but this must be qualified by adjectives such as 'restricted', 'merchant', or 'investment'. To avoid confusion with licensed banks, descriptions such as 'retail' or 'commercial' will not be allowed. Overseas banks seeking authorisation as restricted licence banks may operate in branch or subsidiary form. If in branch form, they may use their registered name even if it includes the word 'bank' or a derivative, but in this case it must be qualified prominently by the words 'restricted licence bank' in immediate conjunction.
To reflect the additional status and privileges of the restricted licence banks and inflation over the period since the establishment of the existing minimum capital requirement for licensed deposit-taking companies in 1981, the present minimum paid-up capital of $75 million for licensed deposit-taking companies will be increased to $100 million for restricted licence banks. The licensed deposit-taking companies, which will be deemed to be restricted licence banks upon the enactment of the amendment ordinance, will be provided with a grace period from March 10, 1989 (on which the minimum capital requirement for registered deposit-taking companies was raised from $10 million to the existing level of $25 million), in which to comply with the new standard. Consequent upon this, the minimum capital requirement for licensed banks will be increased from $100 million to $150 million to reflect the higher capital requirement appropriate to licensed banks.
Apart from deposit-taking, conventional lending and foreign exchange dealings, banks and deposit-taking companies in Hong Kong are increasingly diversifying into other financial services, including securities business, fund management and the provision of investment advice.
Dealers in securities, investment advisers, commodity dealers and commodity-trading advisers and their representatives are required to be registered with the Securities and
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