XN000022-1981-04-09 — Page 4

THURSDAY, APRIL 9, 1981

3

+THERE IS NO EVIDENCE OF SUCH A CHANGE AND IT IS VITALLY IMPORTANT FOR HONG KONG THAT WE SHOULD UNDERSTAND THE REAL MOTIVES OF BRITISH POLICIES, THE PROBLEMS WHICH BRITAIN FACES AND THE OPTIONS WHICH ARE OPEN TO HER POLITICIANS.+

SIR JACK SAID HE WAS SURE THAT MR WU WAS MUCH HEARTENED, AS HE AND NO DOUBT OTHERS WERE, BY LORD CARRINGTON'S SIMPLE BUT FIRM STATEMENT THAT A MAJOR PURPOSE OF HIS RECENT VISIT TO HONG KONG WAS +TO DEMONSTRATE, TO REITERATE, THE UNSHAKEABLE COMMITMENT OF THE BRITISH GOVERNMENT TO THE PROSPERITY AND STABILITY OF HONG KONG.+

+A FUNDAMENTAL STATEMENT, ABOUT FUNDAMENTAL MATTERS,+ SIR JACK REMARKED.

BANKING AND DTC BILLS OUT TOMORROW

****

THE GOVERNMENT WILL INTRODUCE TWO BILLS TO AMEND THE BANK ING ORDINANCE AND THE DEPOSIT-TAKING COMPANIES ORDINANCE AS PART OF

ITS MONETARY REFORM, THE FINANCIAL SECRETARY, THE HON SIR PHILIP HADDON-CAVE, SAID IN THE LEGISLATIVE COUNCIL TODAY (THURSDAY).

THE TWO RELATED PURPOSES OF THE BILLS, TO BE PUBLISHED TOMORROW, ARE TO REDEFINE BANKING BUSINESS TO COVER, INTER ALIA, THE BUSINESS OF TAKING FROM THE GENERAL PUBLIC ANY MONEYS REPAYABLE IN LESS THAN THREE MONTHS- AND TO CREATE A NEW CATEGORY OF LICENSED DEPOSIT-TAKING COMPANIES WHICH MAY TAKE ANY DEPOSITS IN EXCESS OF $500 000.

THIS WOULD CREATE A THREE TIER STRUCTURE IN WHICH REGISTERED DEPOSIT-TAK ING COMPANIES WOULD BE RESTRICTED TO TAKING DEPOSITS IN EXCESS OF $50 000 AND FOR PERIODS IN EXCESS OF THREE MONTHS.

LICENSED BANKS WOULD CONTINUE TO HAVE A MONOPOLY OF ALL DEPOSITS, WHATEVER THE IR ORIGINAL TERM TO MATURITY, OF UP TO 350 000. THEY WOULD ALSO HAVE THE SOLE RIGHT TO TAKE DEPOSITS WITH AN ORIGINAL TERM TO MATURITY OF LESS THAN THREE MONTHS UP TO $500 000.

FOR LARGER DEPOSITS OF ANY MATURITY, THEY WOULD HAVE TO COMPETE WITH THE PROPOSED NEW CATEGORY OF LICENSED DEPOSIT-TAK ING COMPANIES (+MERCHANT+ OR +WHOLESALE+ BANKS).

FOR DEPOSITS OF $50 000 OR MORE WITH AN ORIGINAL TERM TO MATURITY OF THREE MONTHS OR MORE, THEY WOULD HAVE TO COMPETE WITH THOSE DEPOS IT-TAK ING COMPANIES NOT LICENSED AS SO-CALLED +MERCHANT BANKS+.

SIR PHILIP SAID THE REASON FOR CREATING THIS THREE TIER SYSTEM WAS THE NEED TO HAVE AN EFFECTIVE INTEREST RATE AGREEMENT.

+THIS AGREEMENT HAS ASSUMED A NEW SIGNIFICANCE SINCE THE FLOATING OF THE HONG KONG DOLLAR, A SIGNIFICANCE WHICH IT DID NOT HAVE WHEN THE HONG KONG DOLLAR HAD A PARITY RELATIONSHIP WITH THE U.S. DOLLAR, LET ALONE WHEN IT WAS TIED TO STERLING.

J

/+IN THOSE