CO129-561-6 Companies Amendment Ordinance draft bill- correspondence 18-1-1937 - 6-7-1938 — Page 2

CI·d "C"

1 Gov Genf

18.1.37

SPANES TO LIBRAR

Fwds

draft Bill for

consideration

2

The aim of the present draft Bill is to

obtain stricter legislative control of the larger

"Europe style" Savings Banks in Hong Kong. The

"banking crisis" of 1935 lead to a closer examination

of the position of such banks by Mr. Young of the

Treasury, and a Government Committee which, it is now

reported, was unanimously of the opinion that

Ton

legislation is necessary, particularly in the protection

of the poor, class of people who entrust their savings

poor

to banks.

the H.K.

Mr. Young divided/banks which were

Le I a 5367//35 particularly liable to disaster into two classes.

1) Branches of foreign banks which had no hope

or intention of getting enough legitimate business to

justify their existence but could only earn their

keep by exchange speculation.

2) Chinese trading institutions which received

money on deposit in the first place usually from

relations and friends of the shopkeeper and then from a

growing circle of small Chinese depositors. There

were, generally speaking, no sound and liquid investment

in which these shops could invest their money, and if

there were they would not return anything like the

rate of interest which the Chinese depositor expected.

As a result excess deposits were invested in land, and

property and company shares, and the investments became

more and more frozen. Frequently part of the

deposits were not invested at all but were used for

speculation on the exchange market.

Banks such as these were particularly

liable to disaster not only from their comparative

lack