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The new preferential class would enable eligible depositors of licensed banks to receive priority payment of up to $100,000 for their net deposits in the event of the liquidation of a bank. The new class should rank immediately after the existing classes for remuneration and other payments to employees and statutory debts. The proposal is intended to provide a measure of comfort for depositors, which would in turn contribute to the stability of the banking sector.
The proposal covers all depositors except persons and companies that are connected with the bank being liquidated, for example its directors and its subsidiary companies. Also excepted is the Hong Kong Monetary Authority as the bank regulator, which places deposits with banks in the name of the Exchange Fund. Certain banking institutions are also excluded, such as licensed banks, restricted licensed banks, deposit-taking companies and multilateral development banks.
Where less than full dividend is paid to creditors, the new class will somewhat diminish dividends to very large creditors, excluded depositors and ordinary creditors. However, the proposal would contribute to a more speedy liquidation by reducing the number of creditors very considerably at an early stage of the winding up. Past research has shown that some 80% to 90% of deposit accounts of retail banks have a balance of $100,000 or below. Hence the notional loss of having to give up a certain percentage of dividend payment may be more than offset by the accelerated receipt of their money by the other creditors and the reduction in administrative costs of the liquidation.
Besides the introduction of the new preferential class, other aspects of the liquidation are not affected by the Bill and will continue to be governed by established liquidation law and practice.
The Bill also amends a number of provisions in the Ordinance to permit the use of either Chinese or English to file documents with the Companies Registry, thereby placing both languages on an equal footing. The proposal to use certificates of incorporation with preprinted signatures would allow the Registry's resources to be used in a more cost effective and efficient manner.
Mr President, this is a package of useful amendments, necessary to increase confidence in the banking system and to facilitate access to the Companies Registry.
End/Wednesday, April 19, 1995