3
WEDNESDAY, MARCH 9, 1983
INSURANCE DEPOSIT SCHEME NOT JUSTIFIED
******
A DEPOSIT INSURANCE SCHEME IN HONG KONG WOULD NOT BE JUSTIFIED OR WORKABLE AND WOULD BE EXPENSIVE, THE FINANCIAL SECRETARY, THE HON JOHN BREMRIDGE, SAID IN THE LEGISLATIVE COUNCIL TODAY, –
MR BREMRIDGE WAS REPLYING TO THE HON ANDREW SO WHO ASKED WHAT CONSIDERATION HAD BEEN GIVEN TO ESTABLISHING A DEPOSIT INSURANCE FUND TO PROTECT DEPOSITORS WITH BOTH BANKS AND DEPOSIT-TAK I NG COMPANIES.
OTHER THAN IN THE UNITED STATES - WHERE THERE IS A LIMIT OF US$100 000 -- SCHEMES OF THIS NATURE WERE GENERALLY RESTRICTED TO COVERING SMALL DEPOSITS, MR BREMRIDGE POINTED OUT.
PREMIUMS FOR A SCHEME TO COVER ALL DEPOSITS WOULD BE PROHIBITIVE AND WOULD THUS RENDER IT UNWORKABLE, HE SAID.
MOREOVER, LEGISLATORS HAD TENDED TO HAVE THE INTERESTS OF SMALL DEPOSITORS IN MIND WHEN FRAMING SUCH SCHEMES, HE ADDED.
+THE ESSENCE OF THE THREE-TIER STRUCTURE IN HONG KONG IS THAT ONLY BANKS ARE ALLOWED TO ACCEPT SMALL DEPOSITS, LARGER DEPOSITS WHICH HAVE BEEN LOST THROUGH RECENT DTC FAILURES WOULD PROBABLY NOT HAVE BEEN COVERED BY A DEPOSIT INSURANCE SCHEME, MR BREMRIDGE SAID.
WHILE $50 000 MIGHT BE CONSIDERED SMALL NOWADAYS, IT WOULD UNDER HONG KONG'S SYSTEM BE A LOGICAL UPPER LIMIT IF ANY INSURANCE SCHEME WERE TO BE INTRODUCED, HE SAID,
+ONE CONSIDERATION, WHICH IS OFTEN OVERLOOKED, IS THAT SUCH SCHEMES MUST INEVITABLY BE FOUNDED ON THE ACTUARIAL ASSUMPTION THAT THE MIGHTY ARE UNLIKELY TO FALL.
*THE STRONGER INSTITUTIONS (OR THEIR DEPOSITORS) ARE, IN EFFECT, REQUIRED TO STAND READY TO PAY OFF THE DEPOSITORS WITH THE WEAK IN THE EVENT OF FAILURE, MR BREMRIDGE STATED.
SUCH ARRANGEMENTS, HE ADDED, HAD PROVED ACCEPTABLE IN SOME COUNTRIES FOR VARIOUS REASONS, INCLUDING THE PRESERVATION OF A COMPETITIVE FINANCIAL SYSTEM.
BUT HE POINTED TO HONG KONG SITUATION BEING DISTINCT IN AT LEAST THREE RESPECTS 1
* FIRST, HONG KONG'S VARIOUS STATUTORY ARRANGEMENTS ALREADY ENSURE AN ADEQUATE AMOUNT OF COMPETITION FOR DEPOSITS.
* SECOND, THE STRONG ARE ALREADY PREPARED TO STAND BEHIND THE WEAK IN A WAY WHICH DOES NOT SIMPLY HELP DEPOSITORS BUT MAY ALSO SAVE THE INSTITUTIONS. THIS SUPPORT HAS NOT GIVEN DEPOSITORS OF FAILED INSTITUTIONS THE COVER THAT INSURANCE MIGHT HAVE PROVIDED, BUT IT CAN HELP TO PROTECT THEM FROM IRRATIONAL MISFORTUNE.
/* THIRD, TO ....