WEDNESDAY, MARCH 25, 1981
BUT MR LI POINTED OUT THAT SIR PHILIP APPEARS TO HAVE OVERLOOKED THE TENDENCY THAT EVEN SMALL DEPOSITORS ARE ALSO SENSITIVE TO INTEREST RATE CONSIDERATIONS,
EXCLUDING THAT IMPORTANT FACTOR, MR LI OBSERVED, THERE WILL BE TWO LIKELY CONSEQUENCES TO ANY SUCH AMENDMENT.
FIRSTLY, THE LICENSED BANKS WOULD BE GIVEN A CHANCE TO RECOVER FROM THE EXISTING DEPOSIT-TAKING COMPANIES A SECTOR OF THE DEPOSIT MARKET LOST IN FAIR COMPETITION OVER THE PAST YEARS.
+SECONDLY, THE NEW CATEGORY OF MERCHANT BANKS' WOULD BE ABLE TO DISREGARD THE INTEREST RATE AGREEMENT OF THE HONG KONG ASSOCIATION OF BANKS IN TAKING DEPOSITS OF $500 000 OR MORE WITH ANY MATURITY, SAID MR LI.
AS FAR AS HE WAS AWARE, THE FUNCTIONS OF A MERCHANT BANK MAY INCLUDE MANAGEMENT OF AND PARTICIPATION IN MEDIUM AND LONG TERM SYNDICATED LOANS, PROVISION OF CORPORATE FINANCE INCLUDING BOND ISSUES, ACCEPTANCE OF DEPOSITS IN ALL MAJOR CURRENCIES, FINANCIAL AND INVESTMENT CONSULTANCY SERVICES, MONEY MARKET ACTIVITIES, FOREIGN EXCHANGE TRANSACTIONS, TRADE FINANCING AND PROJECT FINANCE.
IT WAS OBVIOUS THAT A MERCHANT BANK WAS NOT JUST AN UPGRADED DEPOSIT-TAKING COMPANY, BUT A COMPLEX FINANCIAL INSTITUTION CAPABLE OF UNDERTAKING A MULTIPLICITY OF ACTIVITIES WHICH IN TURN WOULD REQUIRE A SOPHISTICATED SYSTEM OF PRUDENTIAL SUPERVISION.
+ IS IT THE INTENTION OF THE FINANCIAL SECRETARY TO LEGISLATE FOR 'MERCHANT BANKS' AS SUCH, OR WAS HE MERELY THINKING IN TERMS OF A TOOL TO HELP REGULATE LOCAL INTEREST RATES?+ MR LI ASKED.
IN HIS OPINION, THE DEPOSIT-TAKING SYSTEM IN HONG KONG, FOLLOWING RECENT AMENDMENTS, WORKED WELL ENOUGH AND DID NOT NEED SUCH A CHANGE.
+WHETHER THE PRESENT PROPOSAL WILL PROVIDE A SATISFACTORY SOLUTION TO THE PROBLEMS MENTIONED BY THE FINANCIAL SECRETARY IS A MATTER OF CONFLICTING OPINION.
+ THE ACTIVITIES OF FINANCE COMPANIES OVER THE PAST DECADE HAVE GIVEN RISE TO A NUMBER OF ISSUES IN THE OVERALL MANAGEMENT OF THE ECONOMY.
+TO AVOID A REPETITION OF THESE MISTAKES I MUST STRESS IT IS ESSENTIAL TO PROCEED WITH ALL DUE CAUTION, IF IN ANOTHER FEW YEARS WE ARE NOT TO FACE PROBLEMS SIMILAR TO THOSE NOW POSED BY THE DEPOSIT-TAKING COMPANIES,+ MR LI CAUTIONED.
TURNING TO FOREIGN CURRENCY DEPOSITS HELD IN HONG KONG, MR LI WELCOMED THE IDEA OF EXEMPTING THEM FROM INTEREST TAX.
THIS WOULD ALLOW HONG KONG NOT ONLY TO CONTINUE WITH THE SYNDICATION OF FOREIGN CURRENCY LOANS BUT ALSO TO COMPLETE THE FUNDING ARRANGEMENTS HERE WITHOUT OFFSHORE INTERVENTION.
/4HAVING 1GRO