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FINANCIAL AND MONETARY AFFAIRS
HONG KONG's financial sector comprises an integrated network of institutions and markets which, under various forms of regulation, provide a wide range of products and services to local and international customers and investors.
Financial Institutions
Since 1981, Hong Kong has maintained a three-tier system of deposit-taking institu- tions. Following legislation in January 1990, the categories of licensed and registered deposit-taking company have been replaced by restricted licence bank and deposit-taking company respectively. The changes were primarily designed to improve the status of licensed deposit-taking companies. The third category of authorised institution, that of licensed bank, has remained unchanged.
Restricted licence banks have a greater scope in the use of business descriptions than the licensed deposit-taking companies which they have replaced. They are 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 licence', 'merchant', or 'investment'. To avoid confusion with licensed banks, descriptions such as 'retail' or 'commercial' are not 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.
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 $150 million, must 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 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 over banks and offer some acceptable form of reciprocity to banks from Hong Kong.
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