XN000022-1979-04-12 — Page 7

THURSDAY, APRIL 12, 1979

THE FINANCIAL SECRETARY ALSO QUESTIONED WHETHER IT WOULD BE PROPER, OR GENERALLY ACCEPTABLE TO THE PUBLIC, FOR THE EXCHANGE FUND TO HOLD PRIVATE SECTOR ASSETS, WHICH COULD NOT BE EASILY REALISED, IF AN INSTITUTION SIMILAR TO THE HONG KONG BUILDING AND LOAN AGENCY LIMITED WERE TO BE SET UP TO PROVIDE LOANS TO INDUSTRY.

HE ADDED THAT THE IDEA OF AN INDUSTRIAL DEVELOPMENT BANK HAD BEEN MOOTED ON VARIOUS OCCASIONS SINCE 1959 WHEN SIR ROBERT BLACK APPOINTED A COMMITTEE TO EXAMINE THE NEED FOR SUCH A BANK.

THE COMMITTEE ADVISED THAT NO SUCH NEED EXISTED AND I AM NOT AWARE THAT THE MANUFACTURING SECTOR OF OUR ECONOMY IS PRESENTLY EXPERIENCING ANY DIFFICULTY IN OBTAINING FUNDS FOR COMMERCIALLY VIABLE PROJECTS,+ HE SAID.

THE FINANCIAL SECRETARY, HOWEVER, REVEALED THAT SOURCES OF FINANCE FOR INDUSTRY WERE BEING EXAMINED BY THE ADVISORY COMMITTEE ON DIVERSIFICATION AND, IN PARTICULAR, EY A SUBSIDIARY WORK ING GROUP ON FINANCIAL FACILITIES.

HE SAID HE WOULD PREFER TO WITHHOLD A DEFINITIVE REPLY FOR A FEW MONTHS.

MR. HADDON-CAVE ALSO COMMENTED ON THE IDEA OF PREMIUM SAVINGS BOND SCHEME AND THE CONTROL OF DEPOSIT-TAKING COMPANIES.

HE SAID HE WAS NOT CONVINCED THAT SUCH A SAVINGS BOND SCHEME WOULD ASSIST IN CURBING INFLATION. IT WOULD ENCOURAGE WITHDRAWALS FROM SAVINGS ACCOUNTS WITH BANKS WHICH CURRENTLY PAY SOME 1-3/4 PER CENT BELOW THE RATE WHICH MR. CHEONG-LEEN SUGGESTED SHOULD BE PAID UNDER THE PREMIUM SAVINGS BOND SCHEME.

THIS MIGHT WELL HAVE AN INFLATIONARY IMPACT BY FORCING BANKS TO WIDEN THE MARGINS BETWEEN THE IR BORROWING AND LENDING RATES.

IT COULD ALSO, IF IT WERE WIDELY SUPPORTED, HAVE A SERIOUS AND UNDESIRABLE IMPACT ON THE LIQUIDITY OF THE BANKING SYSTEM.

TOUCHING ON THE NEED FOR DEPOSIT-TAKING COMPANIES TO BE SUBJECT TO MINIMUM LIQUIDITY REQUIREMENTS, THE FINANCIAL SECRETARY ASSURED THAT LATER THIS YEAR LEGISLATION WILL BE IMPLEMENTED TO ENABLE HIM TO SET MINIMUM LIQUIDITY RATIOS TO BE OBSERVED BY EVERY REGISTERED DEPOSIT-TAKING COMPANY.

HE ADDED THAT HE EXPECTED TO PUT FORWARD, AT THE SAME TIME, COMPLEMENTARY PROPOSALS TO REVISE THE LIQUIDITY PROVISIONS OF THE BANKING ORDINANCE, TO ENSURE THE SMOOTH AND EFFICIENT WORKING OF THE MONEY MARKETS.