WEDNESDAY, APRIL 29, 1981
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BILLS PROPOSE CHANGES TO BANK ING AND DTC BUSINESS
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THE BANKING (AMENDMENT) BILL 1981 AND THE DEPOSIT-TAKING COMPANIES (AMENDMENT) (NO. 2) BILL 1981 WERE GIVEN A SECOND READING IN THE LEGISLATIVE COUNCIL TODAY (WEDNESDAY).
THESE TWO BILLS HAVE TWO RELATED PURPOSES, NAMELY, THE REDEFINITION OF BANKING BUSINESS AND THE CREATION OF A NEW CLASS OF DEPOSIT-TAKING INSTITUTION, SO THAT THE BUSINESS OF TAKING DEPOSITS WOULD IN FUTURE BE CARRIED OUT BY THREE DISTINCTIVE CLASSES OF INSTITUTION.
THEY ARE LICENSED BANKS, TAKING DEPOSITS OF ANY MATURITY AND IN ANY AMOUNT IN THE COURSE OF THE IR BANK ING BUSINESS LICENSED DEPOSIT-TAK ING COMPANIES, CARRYING OUT THE EXISTING FUNCTIONS_OF DEPOS IT-TAK ING COMPANIES, EXCEPT THAT THEY WOULD NOT BE PERMITTED TO TAKE DEPOSITS OF LESS THAN $500 000- AND, OTHER (REGISTERED) DEPOSIT-TAKING COMPANIES, CARRYING OUT THEIR EXISTING FUNCTIONS, EXCEPT THAT THEY WOULD NO LONGER BE PERMITTED TO TAKE DEPOSITS WITH AN ORIGINAL TERM TO MATURITY OF LESS THAN THREE MONTHS.
THE FINANCIAL SECRETARY THE HON SIR PHILIP HADDON-CAVE SAID SPLITTING THE BUSINESS OF TAKING DEPOSITS BETWEEN THREE TYPES OF INSTITUTIONS BANKS, LICENSED DEPOSITS-TAKING COMPANIES AND REGISTERED DEPOSIT-TAKING COMPANIES - WOULD HAVE A SIGNIFICANT
IMPACT ON THE MONETARY SECTOR.
FIRST, AS REGARDS THE 30 COMPANIES USED BY LICENSED BANKS TO GARNER DEPOSITS OUTSIDE THE SCOPE OF THE INTEREST RATE AGREEMENT. THE GREATER THE RESTORATION OF THE BANKS' DEPOSIT BASE WHICH IS ACHIEVED, THE LESS THE NEED FOR THE BANKS TO MAINTAIN THESE DEPOS IT-TAK ING COMPANY SUBSIDIARIES. WHILE SOME OF THEM MIGHT BE WOUND UP, OTHERS MIGHT BE MAINTAINED TO COMPETE FOR TERM DEPOSITS BETWEEN 3 AND 17 MONTHS (THE INTEREST RATE AGREEMENT DOES NOT APPLY TO DEPOSITS PLACED FOR 18 MONTHS OR LONGER).
SECONDLY, AS REGARDS THE 182 COMPANIES DOING WHOLESALE+ BUSINESS: IT IS BASICALLY THESE COMPANIES WHICH WOULD BE ELIGIBLE (IF THEY MEET THE CRITERIA) FOR LICENSED STATUS, BUT ONLY A FEW WOULD QUALIFY. THERE ARE AT PRESENT ONLY 12 REGISTERED DEPOSIT- TAKING COMPANIES WITH PAID-UP SHARE CAPITAL, OR PAID-UP SHARE CAPITAL PLUS RESERVES, IN EXCESS OF $100 MILLION AND WHICH COULD, THEREFORE, MEET THAT OBJECTIVE EITHER AS OF NOW, OR AFTER CAPITAL IS ING THE IR RESERVES.
THIRDLY, AS REGARDS THOSE 130 COMPANIES ENGAGED PRIMARILY IN +FINANCE COMPANY BUSINESS IN THE DOMESTIC ECONOMY: THEY WOULD LOSE A PROPORTION OF THE IR DEPOSIT BASE ONCE THEY WERE NO LONGER ALLOWED TO TAKE SHORT-TERM DEPOSITS, UNLESS THEY SUCCEEDED IN PERSUADING THOSE DEPOSITORS TO PLACE THE IR FUNDS FOR THREE MONTHS OR LONGER. AT THE END OF FEBRUARY 1981 THESE 130 COMPANIES HAD TOTAL DEPOSITS OF $17 BILLION OR 37 PER CENT OF TOTAL
DEPOSITS HELD BY DEPOS IT-TAKING COMPANIES.
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