XN000022-1978-11-15 — Page 4

WEDNESDAY, NOVEMBER 15, 1978

3

DEPOSIT-TAKING COMPANIES (AMENDMENT) BILL PASSED INTO LAW

*****

THE DEPOSIT-TAK ING COMPANIES (AMENDMENT) BILL 1978 WHICH SEEKS TO PROVIDE FUTHER PROTECTION TO DEPOSITORS WAS PASSED INTO LAW IN THE LEGISLATIVE COUNCIL TODAY.

SPEAKING ON BEHALF OF HIS UNOFFICIAL COLLEAGUES IN SUPPORT OF THE BILL, THE HON. LI FOOK-WO SAID:

+THE UNOFFICIALS BELIEVE THAT ITS ENACTMENT WILL NOT ONLY PROVIDE FURTHER PROTECTION TO DEPOSITORS BUT ALSO ALLOW THE GOVERNMENT TO REGULATE MORE ADEQUATELY THE OPERATIONS OF REGISTERED DEPOSIT-TAKING COMPANIES.+

MR. LI ALSO POINTED OUT THAT THE UNOFFICIALS ARE FULLY AWARE THAT THE LIQUIDITY POSITION OF SUCH COMPANIES WILL NOT BE, BY ITSELF A GENUINE SAFEGUARD IF THE COMPANIES ENGAGE IN UNSOUND BUSINESS PRACTICES.

+A SYSTEM OF PRUDENTIAL SUPERVISION IS THEREFORE ABSOLUTELY ESSENTIAL, ESPECIALLY AS SHORT-TERM CLAIMS BY BANKS ON THESE COMPANIES ARE NOT TO RANK AS LIQUID ASSETS, HE SAID.

MR. LI PERSONALLY FELT THAT THE LIQUIDITY RATIO REQUIREMENT FOR THE COMPANIES SHOULD, OF NECESSITY, BE LOWER THAN THAT OF A BANK. EVEN IN THE CASE OF THE BANKS, HE AGREED WITH THE FINANCIAL SECRETARY THAT THE LIQUIDITY POSITION NEEDS TO BE RE-EXAMINED.

HE SUGGESTED THAT THIS COULD BE DONE AT THE SAME TIME AS THE DEFINITIONS OF LIQUID ASSETS AND THE MINIMUM PROPORTION OF DEPOSIT LIABILITIES FOR DEPOSIT-TAKING COMPANIES ARE RESOLVED BY THE GOVERNMENT.

MR. LI RECALLED THAT EARLY IN NOVEMBER 1973 HE HAD ASKED THE GOVERNMENT TO CONSIDER INTRODUCING LEGISLATION TO REGULATE FINANCE COMPANIES IN THE INTEREST OF THE PUBLIC AT LARGE. HE HAD MADE VARIOUS SUGGESTIONS AND VARIOUS MEASURES HAVE BEEN TAKEN BY THE GOVERNMENT. THE PRESENT LEGISLATION DEALS WITH THE FILING OF MONTHLY RETURNS BY THE DEPOSIT-TAK ING COMPANIES AND THE REQUIREMENT OF A MINIMUM LIQUIDITY RATIO.

HE WAS SOMEWHAT DISAPPOINTED HOWEVER THAT IT HAS TAKEN FOUR YEARS AND EIGHT MONTHS SINCE HE MADE THE SUGGESTION, BEFORE THE SUBMISSION OF MONTHLY RETURNS IS TO BE MADE A STATUTORY REQUIREMENT.

+I WOULD HAVE THOUGHT THAT THIS WOULD HAVE BEEN A RELATIVELY SIMPLE EXERCISE WELL WITHIN THE CAPACITY OF OUR LEGAL DRAFTSMEN,+ MR. LI SAID, ALTHOUGH HE APPRECIATED THE PROBLEMS INVOLVED IN ATTEMPTING TO SPECIFY A MINIMUM LIQUIDITY RATIO WHICH CANNOT BE DETERMINED ARBITRAR ILY.

ANOTHER UNOFFICIAL COUNCILLOR, THE HON. ANDREW SO ALSO SPOKE ON THE BILL.

WHILE HE SUPPORTED IT WHOLE-HEARTEDLY. HE SUGGESTED THAT IN ORDER TO FURTHER PROTECT MEMBERS OF THE PUBLIC AND TO ENSURE THAT THE FINANCIAL SECTOR ADEQUATELY SERVICES THE NEEDS OF OUR GROWING ECONOMY, THE GOVERNMENT SHOULD AT A LATER STAGE CONSIDER INTRODUCING AN INSURANCE PROGRAMME.

THIS PROGRAMME