WEDNESDAY, JANUARY 11, 1978
BILL TO TRANSFER NOTE-ISSUING POWERS TO HONGKONG BANK
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TWO BILLS AIMED AT TRANSFERRING THE NOTE-ISSUING POWERS FROM MERCANTILE BANK TO HONGKONG AND SHANGHAI BANK ING CORPORATION, AND ENSURING THAT MERCANTILE BANK NOTES IN CIRCULATION WILL REMAIN LEGAL TENDER WERE INTRODUCED INTO THE LEGISLATIVE COUNCIL TODAY.
THEY ARE THE HONG KONG AND SHANGHAI BANK ING CORPORATION (AMENDMENT) BILL 1978 AND THE MERCANTILE BANK NOTE ISSUE (REPEAL) BILL 1978.
SPEAKING AT THE SECOND READING OF THE FIRST BILL, THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE SAID THE BILL SOUGHT TO REPEAL THE NOTE-ISSUING POWERS OF MERCANTILE BANK AND TO TRANSFER ITS AUTHORITY TO THE HONG KONG AND SHANGHAI BANK ING CORPORATION TO ISSUE NOTES UP TO $30 MILLION AGAINST SECURITIES,
MR. HADDON-CAVE POINTED OUT THAT THE MERCANTILE BANK WAS ACQUIRED BY THE HONGKONG BANK IN 1964 AND SINCE THEN ITS OPERATIONS WITHIN HONG KONG HAVE BEEN PROGRESSIVELY ABSORBED WITHIN THE HONGKONG BANK, AND AS A RESULT ALL BUT ONE OF ITS BRANCHES IN HONG KONG HAVE NOW BEEN CLOSED.
+THUS, THE MERCANTILE BANK'S POSITION AS A NOTE-ISSUING BANK HAS BECOME ANOMALOUS.
+MOREOVER, HE SAID, THERE ARE ONLY ABOUT $30 MILLION OF THE BANK'S NOTES IN CIRCULATION AND THEY ACCOUNT FOR LESS THAN ONE PER CENT OF THE TOTAL NOTE CIRCULATION,+
HE SAID BOTH THE GOVERNMENT AND THE HONG KONG BANK GROUP NOW FELT THAT THE EXISTENCE OF A THIRD NOTE-ISSUING BANK WAS NO LONGER NECESSARY OR DESIRABLE.
AT PRESENT THE THREE NOTE-ISSUING BANKS MAY ISSUE SMALL AMOUNTS OF NOTES KNOWN AS +AUTHORISED ISSUES+ AGAINST INTEREST BEARING SECURITIES IN A FORM APPROVED BY THE SECRETARY OF STATE AND DEPOSITED WITH THE GOVERNMENT OR THE CROWN AGENTS.
BOTH THE HONGKONG BANK AND THE MERCANTILE BANK ARE PERMITTED TO ISSUE $30 MILLION EACH AND THE CHARTERED BANK HAS AN AUTHORISED ISSUE OF $35 MILLION.
ADDITIONAL NOTES THAT FORM THE VAST BULK OF THE TOTAL NOTE CIRCULATION ARE ISSUED AGAINST NON-INTEREST BEARING CERTIFICATES OF INDEBTEDNESS ISSUED BY THE EXCHANGE FUND AND OVER 80 PER CENT OF THE TOTAL NOTES IN CIRCULATION ARE ISSUED BY THE HONGKONG BANK.
ON THE SECOND READING OF THE MERCANTILE BANK NOTE ISSUE (REPEAL) BILL, MR. HADDON-CAVE SAID THE MOST SIGNIFICANT POINT IN THE BILL FOR THE PUBLIC WAS THAT WHEN THE BILL BECAME LAW, ANY MERCANTILE BANK NOTE IN ISSUE WOULD BE DEEMED TO HAVE BEEN ISSUED BY THE HONGKONG BANK.
/+THIS ENSURES THAT