WEDNESDAY, MAY 27, 1981
AS THEY ARE NOT COVERED BY THE INTEREST RATE AGREEMENT THEY HAVE HAD A COMPETITIVE ADVANTAGE OVER THE BANK WHO HAVÉ REACTED BY USING SUBSIDIARY OR ASSOCIATED DEPOSIT-TAK ING COMPANIES TO BID FOR DEPOSITS OUTSIDE THE INTEREST RATE AGREEMENT.
+WE ARE TOLD THAT, AT THE END OF FEBRUARY 1981, THE 94 COMPANIES CONCERNED HELD 77 PER CENT OF ALL DEPOSITS WITH DEPOSIT-TAKING COMPANIES, AND 30 OF THESE COMPANIES WERE PRIMARILY CONCERNED WITH ON-LENDING THE DEPOSITS GARNERED BY DEPOSIT-TAKING COMPANIES CONNECTED WITH BANKS BEING SO ON-LENT.
+DEVICES SUCH AS THESE MUST STOP BUT EQUALLY WELL THE CONDITIONS WHICH GIVE RISE TO THEM MUST BE PUT RIGHT, HE SAID.
TO QUALIFY LICENSED STATUS, MR SWAINE SAID, A DEPOSIT-TAK ING COMPANY WHICH IS A SUBSIDIARY OR ASSOCIATE OF A LICENSED BANK MUST SATISFY THE REQUIREMENT THAT IT IS WIDELY RECOGNISED AS AN ENTITY IN ITS OWN RIGHT AND HAS A SEPARATE MANAGEMENT STRUCTURE AT EXECUTIVE LEVELS.
+THIS ADDITIONAL CRITERION IS WELCOME BECAUSE IT SERVES TO UNDERSCORE THE DETERMINATION THAT THE INTEREST RATE AGREEMENT SHOULD BE UPHELD AND SHOULD NOT BE CIRCUMVENTED BY A BANK THROUGH A CORPORATE ALTER EGO, COMPETING FOR FUNDS OUTSIDE THE INTEREST RATE AGREEMENT, HE ADDED.
THE HON STEPHEN CHEONG ALSO COMMENTED ON THE BILLS.
HE NOTED THAT ONE OF THE TWO REASONS GIVEN BY THE FINANCIAL SECRETARY FOR CREATING A NEW THREE-TIER STRUCTURE FOR DEPOSIT- TAKING COMPANIES WAS TO ENSURE THAT AN EFFECTIVE INTEREST RATE AGREEMENT WAS AVAILABLE AS AN INSTRUMENT OF GOVERNMENT'S MONETARY POLICY.
THE FINANCIAL SECRETARY CLAIMED THAT THIS WAS THE ONLY MEANS AT OUR DISPOSAL TO INFLUENCE THE GROWTH RATE OF THE MONEY SUPPLY+ THROUGH +VARIATIONS IN THE LEVELS OF INTEREST RATES+.
BUT MR CHEONG BELIEVED THAT, IN OUR CIRCUMSTANCES, INTEREST RATE VARIATIONS ALONE WILL NOT HAVE THE DESIRED EFFECT ON CURTAILING THE GROWTH RATE OF MONEY SUPPLY AND THAT IT IS NOT THE ONLY MEANS AT OUR DISPOSAL TO INFLUENCE MONEY SUPPLY.
+ANOTHER FEASIBLE REGULATOR OF MONEY SUPPLY IS CHANGES IN THE MINIMUM LIQUIDITY RATIOS OF ALL DEPOSIT-TAKING INSTITUTIONS, + HE SUGGESTED.
+THE POWER TO EFFECT SUCH CHANGES DEFINITELY LIES WITH THE GOVERNMENT.+
THE SECOND REASON GIVEN BY THE FINANCIAL SECRETARY FOR THE REFORMS WAS TO AVOID DE-STABILIZING INFLUENCES THAT WOULD UNDERMINE THE GENERAL STABILITY OF OUR MONETARY SYSTEM+.
HOWEVER, MR CHEONG EXPRESSED CONCERN THAT THE VERY ELEMENTS OF THE THREE-TIER STRUCTURE, IF NOT MONITORED CAREFULLY, MAY IN THEMSELVES LEAD TO DE-STABILIZING INFLUENCES OF OUR MONETARY SYSTEM,
ANDER THE