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WEDNESDAY, FEBRUARY 3, 1988
NEGATIVE INTEREST RATES AN UNWELCOME NECESSITY'
NEGATIVE INTEREST RATES MAY BECOME AN UNWELCOME NECESSITY IF HONG KONG IS TO DEFEND ITSELF AGAINST WHOLLY UNWARRANTED SPECULATION ON A REVALUATION OF THE HONG KONG DOLLAR AGAINST THE U.S. DOLLAR, THE FINANCIAL SECRETARY, THE HON PIERS JACOBS, SAID IN THE LEGISLATIVE COUNCIL TODAY (WEDNESDAY).
IN REPLY TO A QUESTION BY DR THE HON CONRAD LAM. MR JACOBS SAID UNWARRANTED SPECULATION HAD ADVERSELY AFFECTED THE NORMAL CONDUCT OF THE BUSINESS OF BANKING AND OTHER COMMERCIAL ACTIVITIES, AS WELL AS REDUCING THE INCOME OF SAVERS, OF THE MAN IN THE STREET.
MR JACOBS SAID THE GOVERNMENT AND THE COMMITTEE OF THE HONG KONG ASSOCIATION OF BANKS RECOGNISED THAT NEGATIVE INTEREST RATES, IF ACTUALLY APPLIED, WOULD CAUSE SOME DISRUPTION TO THE BUSINESS BANKING.
"THEY MAY ALSO CAUSE FRICTION BETWEEN BANKS AND CUSTOMERS IMPOSE AN ADDITIONAL ADMINISTRATIVE BURDEN ON BANKS," HE SAID.
OF
AND
'NATURALLY, WE ALL HOPE THAT IT WILL NOT RE NECESSARY TO IMPLEMENT THESE ARRANGMENTS FOR NEGATIVE INTEREST RATES, BUT IF THERE IS A NEED THEN UNDOUBTEDLY WE WILL HAVE TO DO SO.
"HOPEFULLY, ANY PERIOD OF IMPLEMENTATION
WOULD BE SHORT AND
THE DISRUPTION CAUSED WOULD BE TEMPORARY.
MR JACOBS ADDED THAT MEMBERS WOULD HAVE OBSERVED THAT THE MARK THREAT OF IMPLEMENTING NEGATIVE INTEREST RATES HAD APPARENTLY BEEN EFFECTIVE IN DETERRING RECENT SPECULATION.
AS TO WHAT BENEFITS MIGHT FLOW FROM THE ADOPTION OF NEGATIVE INTEREST RATES AND WHAT IMPACT IT WOULD HAVE ON HONG KONG, MR JACOBS SAID THAT TO THE EXTENT THAT NEGATIVE INTEREST RATES WERE DESIGNED TO ENSURE STABILITY IN THE EXCHANGE RATE, THE EFFECT WAS CLEARLY BENEFICIAL.
"NO ONE OTHER THAN SPECULATORS
GAINS FROM VOLATILE EXCHANGE RATES. THE COMMUNITY OF HONG KONG PREFERS STABILITY, HE SAID.
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EXPLAINING THE BACKGROUND ΤΟ THE INTRODUCTION OF NEGATIVE INTEREST RATES, MR JACOBS SAID ON DECEMBER 19 THE COMMITTER OF THE ASSOCIATION, AFTER CONSULTATION WITH HIM, EXERCISED ITS POWERS UNDER SECTION 12(1) OF THE HONG KONG ASSOCIATION OF BANKS ORDINANCE AND MADE A NEW RULE CALLED THE "SPECIFIED RATE RULE".
ACCOUNTS OF
MEMBERS
"THIS RULE PROVIDES FOR THE CHARGING OF INTEREST ON LARGE HONG KONG DOLLAR BALANCES MAINTAINED ON THE CLEARING OF THE ASSOCIATION, HE SAID.
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