XN000022-1983-02-23 — Page 40

WEDNESDAY, FEBRUARY 23, 1983

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+1 INTEND TO SPECIFY AS LIQUID ASSETS NEGOTIABLE CERTIFICATES OF DEPOSIT ISSUED IN HONG KONG BY LICENSED BANKS AND LICENSED (BUT NOT REGISTERED) DTC'S, DENOMINATED IN HONG KONG DOLLARS OR IN A FOREIGN CURRENCY WHICH IS FREELY CONVERTIBLE INTO HONG KONG DOLLARS, BEING WITHIN THREE YEARS OF FINAL MATURITY, AND BEING MARKETABLE IN A MANNER SATISFACTORY TO THE COMMISSIONER OF BANKING AND THE COMMISSIONER OF DEPOSIT-TAKING COMPANIES.

+ I ALSO PROPOSE TO PROVIDE THAT NO INDIVIDUAL BANK OR DTC MAY COUNT SUCH ASSETS WITHIN ITS STATUTORY LIQUIDITY REQUIREMENT TO AN EXTENT GREATER THAN TWO PER CENT OF ITS DEPOSIT LIABILITIES AS DEFINED FOR THE CALCULATION OF THE STATUTORY RATIO,+ MR BREMRIDGE SAID.

HE ADDED THAT THE PRECISE SPECIFICATION WOULD SHORTLY BE GAZETTED.

THE VALUE OF LOCAL CD'S IN ISSUE HAS BEEN GROWING SIGNIFICANTLY SINCE THE ADVISORY COMMITTEE ON DIVERSIFICATION REPORTED IN 1979, HE POINTED OUT.

THE SECONDARY MARKET HAS ALSO BEEN INCREASINGLY ACTIVE, BUT IT STILL LACKS THE MATURITY OF ITS EQUIVALENT IN MAJOR CD CENTRES, HE SAID.

HE ADDED THAT THE GOVERNMENT BELIEVES CD'S ARE A USEFUL FORM OF TERM FUNDING FOR THE ISSUERS AND THAT THE DEVELOPMENT OF THIS MARKET IS GENERALLY BENEFICIAL TO HONG KONG'S FINANCIAL SECTOR.

MR BREMRIDGE SAID THAT THE PARAMOUNT CONSIDERATION WHEN DECIDING WHETHER TO EXTEND THE LIST OF SPECIFIED LIQUID ASSETS MUST BE THE PRUDENTIAL ONE.

+THE EVENTS OF RECENT MONTHS HAVE UNDERLINED THE IMPORTANCE OF LIQUIDITY WITHIN THE FINANCIAL SECTOR. THEY HAVE ALSO HIGHLIGHTED THE NEED, IF CREDIBILITY AND CONFIDENCE IN OUR REGULATION OF THIS SECTOR IS TO BE SUSTAINED, TO ENSURE THAT LIQUIDITY STATUS BE CONFERRED ONLY ON ASSETS OF THE HIGHEST LIQUIDITY QUALITY, MR BREMRIDGE STATED.

IT WAS AFTER HAVING CONSIDERED THE MATTER CAREFULLY THAT HE HAD DECIDED TO MAKE A VERY LIMITED+ SPECIFICATION OF LOCAL CD'S AS LIQUID ASSETS, HE SAID.

+ ACKNOWLEDGE THAT THIS DECISION WILL ALLOW NET LIQUIDITY TO BE CREATED WITHIN THE MONETARY SECTOR, WHICH IS NOT POSSIBLE AT PRESENT, HE SAID.

+BY STATING THAT THE COMMISSIONER HAS TO BE SATISFIED AS TO THE MARKETABILITY OF THE PAPER, INTEND TO ENSURE THAT NO CD'> DELIBERATELY ISSUED FOR THE PURPOSE OF CREATING STATUTORY LIQUIDITY ARE SUCCESSFUL IN SO DOING, HE ADDED.

THE COMMISSIONER WILL USUALLY BE SATISFIED IF AN ISSUE HAS, IN THE GENERALLY ACCEPTED MANNER, BEEN MARKETED BY A THIRD PARTY, HE POINTED OUT.

IN OTHER CIRCUMSTANCES, MR EREMRIDGE STATED, THE COMMISSIONER WILL REQUIRE CONVINCING AS TO THE MOTIVE FOR THE ISSUE.

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