XN000022-1978-03-15 — Page 3

WEDNESDAY, MARCH 15, 1978

FOREIGN BANKS MAY NOW APPLY FOR HONG KONG BANKING LICENCE

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THE GOVERNMENT HAS ANNOUNCED ITS DECISION TO ACCEPT APPLICATIONS FROM FOREIGN BANKS FOR BANKING LICENCES IN HONG KONG AND AT THE SAME TIME TIGHTEN THE CONTROL OVER THE OPERATION OF DEPOSIT-TAKING COMPANIES.

IN A STATEMENT OF POLICY IN THE LEGISLATIVE COUNCIL TODAY, THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE, SAID +FAVOURABLE CONSIDERATION+ FOR A HONG KONG BANK ING LICENCE WILL BE GIVEN TO FOREIGN BANKS WHICH MEET THE FOLLOWING CRITERIA:

*

THAT THE APPLICANT BANKS ARE INCORPORATED IN COUNTRIES WHOSE MONETARY AUTHORITY EXERCISE EFFECTIVE SUPERVISION AND HAVE, WHERE NECESSARY, APPROVED THE ESTABLISHMENT OF A BANK IN HONG KONG=

* THAT THE APPLICANT BANKS ARE OF A SUBSTANTIAL SIZE

WITH TOTAL ASSETS, NET OF CONTRA ITEMS, EXCEEDING THE EQUIVALENT OF US$3,000 MILLION- AND

* THAT SOME FORM OF RECIPROCITY IS AVAILABLE IN THE

APPLICANT'S COUNTRY OF INCORPORATION TO HONG KONG BANKS.

+THESE CRITERIA ARE ARBITRARY AND SIMPLISTIC AND

THE GOVERNOR IN COUNCIL AS LICENSING AUTHORITY RESERVES THE RIGHT NOT TO GRANT A LICENCE WHEN TO DO SO WOULD BE AGAINST HONG KONG'S INTEREST, NOTWITHSTANDING THAT AN APPLICANT MEETS THE THREE CRITERIA,+ MR. HADDON-CAVE EMPHASISED.

COMMENTING ON THE DECISION TO EASE THE EXISTING MORATORIUM ON FULL BANKING LICENCES, MR. HADDON-CAVE SAID THIS WAS TO ENSURE THAT THE FINANCIAL SECTOR WAS IN A SUITABLY COMPETITIVE STATE IN THE GENERAL INTEREST OF OUR ECONOMY.

+I AM AWARE OF THE ARGUMENT THAT HONG KONG IS OVER-BANKED, BUT AS LONG AS THERE ARE INSTITUTIONS THAT WISH TO DO THE FULL RANGE OF BANKING BUSINESS AS DEFINED IN THE BANK ING ORDINANCE THERE IS A PRIMA FACIE CASE THAT THE 12-YEAR MORATORIUM ON THE GRANTING OF BANKING LICENCES DOES, IN FACT, RESTRAIN COMPETITION. +

THE FINANCIAL SECRETARY ALSO ANNOUNCED A NUMBER OF PROPOSED CHANGES TO THE REGULATION OF DEPOSIT-TAK ING COMPANIES.

THESE ARE THAT