XN000022-1979-04-11 — Page 5

WEDNESDAY, APRIL 11, 1979

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THE BANKING (AMENDMENT) BILL IS DESIGNED TO MAKE IT CLEAR THAT THE FINANCIAL SECRETARY MAY, FOR MONETARY POLICY PURPOSES, VARY THE MINIMUM LIQUIDITY RATIOS WHICH BANKS IN HONG KONG MUST OBSERVE IN RESPECT OF THE DEPOSITS THEY HOLD FROM THE NON-BANK PUBLIC.

THE MINIMUM LIQUIDITY RATIOS CURRENTLY SET BY SECTIONS 18(2) AND 18(3) OF THE BANKING ORDINANCE, WHICH HAVE BEEN UNCHANGED SINCE 1964, ARE 25 PER CENT IN RESPECT OF LIQUID ASSETS, THREE-FIFTHS OF WHICH (15 PER CENT) MUST BE KEPT IN WHAT ARE TERMED +SUPER LIQUID ASSETS.+

MR. HADDON-CAVE BELIEVED THAT AN INCREASE IN THE RATIOS COULD BE IN APPROPRIATE CIRCUMSTANCES, A HELPFUL MEASURE TO DEPLOY.

+ IN THE MEANTIME, LET ME ASSURE HONOURABLE MEMBERS THAT WE ARE CONTINUING TO EXAMINE OTHER MEASURES TO INFLUENCE THE GROWTH OF THE MONEY SUPPLY AND BANK CREDIT.

+BUT WE WOULD BE AT FAULT IF WE HAD NO CONTINGENCY MEASURE IMMEDIATELY TO HAND. THE PURPOSE OF THIS BILL

IS TO PROVIDE US WITH SUCH A MEASURE, NO MORE AND NO LESS, + HE SAID.

CLAUSE 3 OF THE BILL ADDS A NEW SECTION (SECTION 18A) TO THE PRINCIPAL ORDINANCE, TO PERMIT THE FINANCIAL SECRETARY TO RAISE OR REDUCE THE MINIMUM LIQUIDITY RATIOS WHICH ALL BANKS HAVE TO MAINTAIN UNDER SECTIONS 18(2) AND 18(3) OF THE ORDINANCE.

+ IF EVER I WERE TO MAKE USE OF THIS POWER, I WOULD GIVE THE BANK ING COMMUNITY A REASONABLE PERIOD OF NOTICE, SO THAT THEY COULD TAKE THE NECESSARY STEPS TO ADJUST THE IR ASSET STRUCTURE,+ SAID MR. HADDON-CAVE.

THE DEPOSIT-TAKING COMPANIES (AMENDMENT) BILL COMPLEMENTS THE BANK ING (AMENDMENT) BILL AND IS DESIGNED TO ENABLE THE FINANCIAL SECRETARY TO VARY, FOR THE PURPOSES OF MONETARY POLICY THE MINIMUM LIQUIDITY RATIOS TO BE OBSERVED BY DEPOSIT-TAKING COMPANIES.

MR. HADDON-CAVE SAID CLAUSE 1 OF THE BILL STATES THAT IT SHALL COME INTO OPERATION ON THE SAME DAY AS SECTION 9 OF THE DEPOSIT-TAKING COMPANIES (AMENDMENT) ORDINANCE 1978. THIS IS BECAUSE MINIMUM LIQUIDITY RATIOS HAVE NOT YET BEEN SET FOR THESE COMPANIES.

SECTION 24A OF THE DEPOSIT-TAKING COMPANIES ORDINANCE GOVERNING LIQUIDITY RATIOS, WILL BE BROUGHT INTO OPERATION ON A DAY TO BE APPOINTED BY THE GOVERNOR-IN-COUNCIL.

MR. HADDON-CAVE SAID THAT AS SOON AS SECTION 9 IS BROUGHT INTO OPERATION, WHICH HE HOPED WILL BE NO LATER THAN THIS SUMMER, HE SHALL SPECIFY THE MINIMUM RATIOS WHICH ARE TO BE OBSERVED BY DEPOSIT-TAKING COMPANIES,

DEBATE ON THE THREE BILLS WAS ADJOURNED.

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