XN000022-1978-03-15 — Page 4

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WEDNESDAY, MARCH 15, 1978

THESE ARE THAT DEPOSIT-TAKING COMPANIES WILL BE :-

* REQUIRED TO FURNISH MONTHLY REPORTS TO THE COMMISSIONER

OF BANK ING=

*

*

SUBJECTED TO PERIODIC INSPECTION= AND

SUEJECTED TO LIQUIDITY REQUIREMENTS SIMILAR TO THOSE IN THE BANKING ORDINANCE.

MR. HADDON-CAVE SAID THAT A BILL SUITABLY AMENDING THE DEPOSIT-TAKING COMPANIES ORDINANCE WOULD SHORTLY BE INTRODUCED

IN THE LEGISLATIVE COUNCIL.

COMMENTING ON THE MOVE TO CONTROL THE OPERATION OF THE DEPOSIT-TAKING COMPANIES ALONG THE LINES OF A FULLY-FLEDGED BANK, THE FINANCIAL SECRETARY SAID THE GOVERNMENT HAD THE RESPONSIBILITY FOR THE PROTECTION OF DEPOSITORS.

+AS THE AVAILABLE EVIDENCE INDICATES THAT DEPOSIT-TAK ING COMPANIES ARE DEPENDENT TO A SUBSTANTIAL DEGREE ON LICENSED BANKS AS A SOURCE OF FUNDS, THE GOVERNMENT HAS DECIDED THAT THE SYSTEM OF PRUDENTIAL SUPERVISION SHOULD BE EXTENDED TO DEPOSIT-TAKING COMPANIES, HE SAID.

+THIS BRINGS ME TO THE QUESTION OF WHETHER COMPETITION WITHIN THE FINANCIAL SECTOR ITSELF, PARTICULARLY BETWEEN LICENSED BANKS AND THOSE FOREIGN BANKS REGISTERED AS DEPOS IT-TAK ING COMPANIES, IS EQUITABLE.

+SOME HAVE ARGUED THAT DEPOSIT-TAKING COMPANIES EFFECTIVELY HAVE AN UNFAIR COMPETITIVE ADVANTAGE IN THAT THEY ARE NOT REQUIRED TO MAINTAIN LIQUIDITY REQUIREMENTS.

+THE LICENSED BANKS ACCEPT THAT THERE ARE AREAS IN WHICH THE COMPANIES CANNOT COMPETE, BECAUSE OF THE DEFINITION OF BANKING BUSINESS IN THE BANK ING ORDINANCE AND BECAUSE OF THE $50,000 MINIMUM DEPOSIT REQUIREMENTS, EUT CONTEND THAT RETAIL BANK ING IS NO LONGER OF ITSELF VERY PROFITABLE.

+ THE SOLUTION PROPOSED IS THAT THE DEPOSIT-TAKING COMPANIES ORDINANCE SHOULD BE AMENDED TO PROVIDE FOR LIQUIDITY REQUIREMENTS SIMILAR TO THOSE IN THE WIKING ORDINANCE, + HE SAID.

MR. HADDON-CAVE SAID THE APPROPRIATE PERCENTAGE RATIO TO BE IMPOSED ON DEPOSIT-TAKING COMPANIES WOULD BE SPECIFIED LATER UPON THE ADVICE OF THE COMMISSIONER OF BANK ING.

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