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TUESDAY, NOVEMBER 15, 1983
(1)
(11)
IT IS GIVEN BY A BANK WHICH IS A SHAREHOLDER, OR THE ULTIMATE SHAREHOLDER OF (OR IS CONTROLLED BY THE SAME SHAREHOLDER OR ULTIMATE SHAREHOLDER AS) THE DTC (OR BANK) IN WHOSE FAVOUR THE LETTER IS GIVEN,
THE BANK ISSUING THE LETTER IS ADEQUATELY SUPERVISED IN ITS COUNTRY OF INCORPORATION;
(111) THE LETTER IS ISSUED AS A RESULT OF A RESOLUTION BY THE
BOARD OF DIRECTORS OF THE ISSUER, AND WITH THE FULL AWARENESS OF THE ISSUER'S BANKING SUPERVISORY AUTHORITY (THIS IS ALREADY A REQUIREMENT SET BY THE COMMISSIONER UNDER EXISTING ARRANGEMENTS).
WITH SUCH A LETTER IN PLACE, THE COMMISSIONER WILL SET A LIMIT ON LENDING TO A SINGLE CUSTOMER BY REFERENCE TO THE FOLLOWING FACTORS 1
(A)
(B)
THE CAPITAL AND RESERVES OF THE ISSUER OF THE LETTER,
THE EXTENT OF THE SHAREHOLDING LINK BETWEEN ISSUER AND BENEFICIARY}
(C)
THE LAWS OR PRACTICES (E.G. LENDING CEILINGS) APPLICABLE TO THE ISSUING BANK IN ITS COUNTRY}
(D)
ANY DIRECTION WHICH THE FINANCIAL SECRETARY MAY GIVE THE COMMISSIONER.
TRANSITIONAL ARRANGEMENTS WILL BE MADE TO ALLOW EXISTING LENDING WHICH MAY BE IN EXCESS OF ANY NEW LIMIT SET BY THE COMMISSIONER UNDER THESE REVISED ARRANGEMENTS TO RUN OFF NATURALLY.
THE PURPOSE OF THESE PROPOSALS IS TO ELIMINATE THE OPEN-ENDED NATURE OF THE EXISTING SYSTEM WHEREBY, ONCE AN ACCEPTABLE LETTER HAS BEEN LODGED, THERE IS NO LIMIT WHATSOEVER ON LENDING TO SINGLE CUSTOMERS. HOWEVER, THE LIMIT WHICH THE COMMISSIONER WILL SET ON A DTC'S (OR BANK'S) LENDING TO A SINGLE CUSTOMER MAY, IF A SUITABLE LETTER OF COMFORT IS IN PLACE, TURN OUT TO BE SUBSTANTIALLY IN EXCESS OF 25 PER CENT OF THE CAPITAL AND RESERVES OF THE DTC (OR BANK) ITSELF, WHICH WOULD OTHERWISE STILL BE THE LIMIT.
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