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WEDNESDAY, MAY 6, 1992
WE MUST NOT, OF COURSE, BE COMPLACENT AND THERE ARE UNDOUBTEDLY SOME LESSONS TO BE LEARNT BY BANKING SUPERVISORS ACROSS THE WORLD, PARTICULARLY IN RESPECT OF THEIR STANCE TOWARDS BANKING GROUPS WITH DIFFUSED CORPORATE STRUCTURES. THE INTERNATIONAL GROUP OF BANK SUPERVISORS BASED IN BASLE IS CURRENTLY LOOKING AT THESE ISSUES AND WE WILL CERTAINLY WISH TO CONSIDER SERIOUSLY ANY RECOMMENDATIONS WHICH ARISE FROM THEIR DELIBERATIONS.
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THE LOCAL SUPERVISORY SYSTEM IS UNDER CONSTANT REVIEW. WE ARE WELL ADVISED BY THE BANKING ADVISORY COMMITTEE AND THE DEPOSIT-TAKING COMPANIES ADVISORY COMMITTEE IN THIS AREA. IT IS WORTH NOTING THAT WHEN THE BCCI GROUP CAME TO HONG KONG IN 1979, BY ACQUIRING THE METROPOLITAN BANK WHICH WAS SUBSEQUENTLY RENAMED BCCHK, THE POWERS AVAILABLE TO THE COMMISSIONER OF BANKING IN RESPECT OF THE ENTRY OF FOREIGN-OWNED BANKS WERE UNDOUBTEDLY INADEQUATE. SINCE THEN, THE SUPERVISORY FRAMEWORK HAS BEEN SUBSTANTIALLY STRENGTHENED, AND IT HIGHLY UNLIKELY THAT THE BCCI GROUP WOULD HAVE GAINED ENTRY INTO HONG KONG UNDER THE CURRENT REGIME. THE COMMISSIONER OF BANKING NOW HAS THE POWER TO APPROVE CHANGES OF CONTROL OF AUTHORISED INSTITUTIONS IN ADVANCE AND TO TAKE MEASURES AGAINST EXISTING SHAREHOLDER CONTROLLERS WHO ARE NO LONGER CONSIDERED FIT AND PROPER. THE BANKING (AMENDMENT} BILL 1992 WAS INTRODUCED INTO THIS COUNCIL LAST WEEK WITH A VIEW TO IMPROVING THE SUPERVISORY SYSTEM EVEN FURTHER. THE PROPOSALS ARE MAINLY TO ENABLE AUDITORS TO PLAY A GREATER ROLE IN THE EXAMINATION OF THE INTERNAL CONTROLS OF BANKS. THIS IS PART OF OUR ON-GOING EXERCISE TO IMPROVE THE REGULATORY FRAMEWORK.
APART FROM FURTHER IMPROVEMENTS TO THE SUPERVISORY SYSTEM, THE ADMINISTRATION IS CONSIDERING VARIOUS MEASURES ΤΟ OFFER BETTER PROTECTION TO DEPOSITORS IN THE EVENT OF A BANK FAILURE. THESE INCLUDE THE POSSIBILITY OF SOME FORM OF A DEPOSIT PROTECTION SCHEME, ON WHICH A CONSULTATION PAPER HAS BEEN ISSUED, AND THE POSSIBILITY OF ACCORDING HIGHER PRIORITY TO SMALL DEPOSITORS IN THE EVENT OF BANK LIQUIDATIONS. IN ADDITION, THE NEW LIQUIDITY ADJUSTMENT FACILITY, TO BE INTRODUCED SHORTLY, IS DESIGNED TO HELP BANKS IN THE MANAGEMENT OF THEIR LIQUIDITY.
WITH LITTLE
GIVEN THE BCC INCIDENT WAS AN ISOLATED CASE RELEVANCE TO THE SOUNDNESS OF OUR BANKING SYSTEM AS A WHOLE, THAT PROPOSALS TO FURTHER IMPROVE THE SUPERVISORY SYSTEM ARE IN HAND, AND THAT MEASURES TO BETTER PROTECT SMALL DEPOSITORS ARE BEING CONSIDERED, IT IS DIFFICULT TO SEE WHAT USEFUL PURPOSE AN INDEPENDENT INQUIRY COULD SERVE.
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THE SCOPE OF THE PROPOSED INQUIRY IS VERY WIDE. THE USEFULNESS OF SUCH AN INQUIRY IS EXTREMELY DOUBTFUL SINCE ALMOST ALL THE RELEVANT FACTS HAVE BEEN WELL DOCUMENTED AND ARE PUBLICLY AVAILABLE. AN INQUIRY WILL TAKE UP SUBSTANTIAL RESOURCES, AND WILL DISTRACT ATTENTION FROM THE ONGOING TASK OF SUPERVISION. BCCHK IS NOW IN LIQUIDATION, AND THE TOP PRIORITY MUST BE FOR THAT PROCESS TO PROCEED WITH ALL REASONABLE SPEED SO THAT THE CREDITORS, INCLUDING DEPOSITORS CAN RECEIVE AS LARGE AND AS EARLY A PAYMENT AS POSSIBLE.
MR DEPUTY PRESIDENT, I OPPOSE THE MOTION.
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