XN000022-1981-05-27 — Page 4

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WEDNESDAY, MAY 27, 1981

UNOFFICIAL MEMBERS SUPPORTED THE AMENDING LEGISLATION TO REVISE THE DEFINITION OF BANKING BUSINESS AND TO DRAW A CLEAR DISTINCTION BETWEEN BANKS AND DEPOSIT-TAKING COMPANIES.

BUT THEY HAD A RESERVATION AS TO THE PROPOSED REQUIREMENT THAT, TO QUALIFY FOR LICENSED STATUS, A DEPOS IT-TAK ING COMPANY SHOULD HAVE A PAID-UP SHARE CAPITAL OF AT LEAST $100 MILLION.

SPEAKING AT THE RESUMED DEBATE ON THE TWO BILLS, THE HON JOHN SWAINE SAID: THIS IS SEEN AS IMPOSING TOO ONEROUS A CASH REQUIREMENT ON PROSPECTIVE APPLICANTS.

+AND UNOFFICIAL MEMBERS THEREFORE RECOMMEND THAT THIS REQUIREMENT BE MODIFIED BY APPLICANTS BEING ALLOWED TO MAKE PART OF THE PAYMENT BY YEARLY INSTALMENTS, WITH THE DEFERRED PORTION BEING COVERED BY A BANK OR OTHER SUITABLE GUARANTEE.+

THE BILLS SEEK TO SPECIFY TWO CLASSES OF DEPOSIT-TAK ING COMPANIES - ONE CATEGORISED AS REGISTERED+ AND THE OTHER +LICENSED+.

A REGISTERED DTC WITH A MINIMUM DEPOSIT OF $50 000 WILL NOT BE ALLOWED TO TAKE DEPOSITS OF LESS THAN THREE MONTHS.

HOWEVER, A LICENSED DTC WILL BE ALLOWED TO TAKE DEPOSITS OF ANY MATURITY, BUT IT WILL NOT BE PERMITTED TO TAKE DEPOSITS OF LESS THAN $500 000,

MR SWAINE SAID THE AD HOC GROUP OF UNOFFICIALS FORMED TO STUDY THE BILLS RECEIVED WRITTEN REPRESENTATIONS FROM THE HONG KONG ASSOCIATION OF BANKS AND THE DEPOSIT-TAKING INDUSTRY AND MET WITH THEIR REPRESENTATIVES.

THE DEPOSIT-TAKING COMPANIES FELT, NOT UNNATURALLY, THAT THESE CHANGES WOULD INJURE THE IR BUSINESS, HE SAID.

HOWEVER, MR SWAINE ADDED, IT WAS FELT THAT GOVERNMENT'S POLICY REASONS FOR THESE REFORMS MUST BE SUPPORTED.

+THEY ARE, AS THE FINANCIAL SECRETARY SAID IN HIS SPEECH MOVING THE SECOND READING OF THESE BILLS, TO ENSURE THAT AN EFFECTIVE INTEREST RATE AGREEMENT IS AVAILABLE AS AN INSTRUMENT OF GOVERNMENT'S MONETARY POLICY, AND TO AVERT AN INTEREST RATE WAR WHICH WOULD UNDERMINE THE STABILITY OF THE MONETARY SYSTEM.

+THE FINANCIAL SECRETARY HAS STRESSED THAT THE INTEREST RATE AGREEMENT IS THE ONLY TOOL AVAILABLE TO THE GOVERNMENT TO INFLUENCE THE GROWTH RATE OF THE MONEY SUPPLY.

+AS LONG AS THIS REMAINS GOVERNMENT'S POLICY, AND NOTWITHSTANDING THE DOUBTS WHICH HAVE BEEN FELT AS TO WHETHER SUCH TOOL IS EFFECTIVE, PUBLIC POLICY, TO BE CONSISTENT, REQUIRES THAT THE INTEREST RATE AGREEMENT SHOULD BE OBSERVED AND NOT CIRCUMVENTED.*

MR SWAINE POINTED OUT THAT DEPOSIT-TAKING COMPANIES CAN NOW LAWFULLY QUOTE FOR DEPOSITS OF ANY MATURITY PROVIDED THE DEPOSITS ARE AT LEAST $50 000.

/AS THEY