XN000022-1985-04-24 — Page 4

REDNESDAY, APRIL 24, 1985

NEW DTC LEGISLATION EXPECTED

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THE COMMISSIONER FOR DEPOSIT-TAKING COMPANIES, MR ROBERT FELL TOLD THE HONG KONG DTC ASSOCIATION TODAY (WEDNESDAY) THAT HE EXPECTED NEW LEGISLATION TO REDEFINE THE RELATIONSHIP BETWEEN THE COMMISSIONER AND THE AUDITOR.

AS TO THE ARGUMENT FOR A DEPOSIT INSURANCE SCHEME, MR FELL SAID A SUGGESTION FOR INTRODUCING A SCHEME AS A MARKETING OPERATION +MIGHT BE A WAY AHEAD.+

EARLY IN HIS LUNCH TIME ADDRESS, MR FELL REFERRED TO A REPORT ON HONG KONG'S BANKING SYSTEM BY TWO BANK OF ENGLAND OFFICIALS, A NECESSARILY CONFIDENTIAL DOCUMENT, PARTS OF WHICH WOULD BE ACCEPTED BY THE GOVERNMENT AND PARTS OF WHICH WOULD BE REJECTED.

TO ILLUSTRATE THE GENERAL DIRECTION OF THE REPORT, MR FELL GAVE TWO QUOTATIONS WHICH HE SAID WERE FUNDAMENTAL TO HIS OWN VIEWS ON WHAT WAS REQUIRED:

+WE BELIEVE, THAT IN THE INTERESTS OF GOVERNMENT AND PUBLIC ALIKE THE IDENTIFICATION OF BAD, IMPRUDENT OR INDEED FRAUDULENT MANAGEMENT MUST HENCEFORTH BE A MAJOR TASK OF SUPERVISION GENERALLY, A DUTY WHICH GOES FAR BEYOND ENSURING MORE TECHNICAL COMPLIANCE WITH THE ORDINANCES OR THE ADEQUACY OF PROVISIONS, AND

THE DUTIES OF THE COMMISSIONER ARE WIDER THAN ENFORCING THE SPECIFIC PROVISIONS OF THE LEGISLATION AND EXTEND TO A GENERAL DUTY TO ENSURE THAT ANY INSTITUTION AUTHORISED UNDER AN ORDINANCE IS BOTH SOUNDLY BASED AND PRUDENTLY MANAGED.+

MR FELL TOLD THE ASSOCIATION: THE LESSON THE REGULATOR MUST ACCEPT IS THAT IN A FREE ECONOMY MARKET DEVELOPMENT WILL NOT WAIT

THE THE WHIM OF THE REGULATOR. WHILE THE REGULATOR PONDERS, MARKET WILL FIND WAYS WITHIN THE PERMITTED LIMITS TO MEET THE REQUIREMENTS OF THE WORLD'S BUSINESS. +

HE SAID HONG KONG HAD DEVELOPED AS A MOST IMPORTANT BANKING CENTRE FOR ASIA AND THE PACIFIC. REGULATORS COULD NOT BE ALOOF FROM CHANGE AND MUST BE IN CONSTANT DIALOGUE WITH BANKERS AND AUDITORS.

MR FELL ASKED HOW DO WE MOULD A FRAMEWORK OF PRUDENTIAL SUPERVISION?

THE FIRST TASK WAS TO COMPLETE A SURVEY OF THE INDUSTRY. WHAT WAS NEEDED WAS TO TRY TO SEE WHERE HONG KONG WAS LIKELY TO BE HEADING IN THE NEXT THREE TO FIVE YEARS. ENSURING HONG KONG'S CONTINUED AND HEALTHY GROWTH AS A FULLY ACCEPTED INTERNATIONAL CENTRE WAS THE MAINSPRING OF ALL EFFORTS.

/THE SECOND