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nature of the business that a branch should have no
liquidity of its own. It stands or falls with the whole
institution.
It would obviously not be in the general
interests of the country that local branches of foreign
Banks should be made to register as Palestinian Companies
if such a course resulted in those Companies being
divorced from the point of view of security from their
parent Banks and having to depend on their own specific
investments.
33. We similarly had to discard the proposal that
foreign Banks should be required to keep their deposits of
Palestinian origin in Palestine on the ground of
impracticability.
Liquid investments cannot be found in
Palestine. It must be remembered that Bank deposits
mainly represent savings and surplus money awaiting
profitable investment locally; and that the bulk of such
money is deposited with Banks on current and deposit
account for relatively short periods. The proposal,
therefore, means that having regard to the present
considerable amount of money deposited with Banks owing to
the fact that it cannot be otherwise profitably invested,
such Banks would be statutorily required to invest such
deposits unprofitably or without adequate security.
34. We are of opinion, therefore, with regard to
paragraphs (b) and (c) of our terms of reference that -
(1)
any ratio laid down would be purely arbitrary
and if high would tend to discourage
legitimate banking business;
(11)
it is impracticable to fix by Law minimum
reserves as a percentage of deposits or to
limit the use of short-dated deposits to
short-dated investments.
35.