XN000022-1985-06-02 — Page 4

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SUNDAY, JUNE 2, 1985

FROM THIS EXPOSED POSITION SPRANG HONG KONG'S DETERMINATION TO BE PRUDENT AND CONSERVATIVE IN FINANCIAL AFFAIRS, AND IN PARTICULAR TO REJECT BORROWING AS THE WAY OUT OF RECURRENT EXPENDITURE PROBLEMS.

+BORROWING IS EASY, PAYING BACK MIGHT NOT BE. NEEDS BALANCED BUDGETS,+ HE SAID.

HONG KONG

TURNING TO BANKING ISSUES, HE SAID THAT AN OVERSEAS BANK SEEKING A FULL LICENCE IN HONG KONG HAD INTER ALIA TO SHOW MINIMUM TOTAL ASSETS NET OF CONTRA ITEMS OF US$12 BILLION.

NOTING THAT THERE WERE ABOUT 140 BANKS IN THE WORLD WHICH MET THIS QUALIFICATION, SIR JOHN SAID OVER HALF OF THEM WERE ALREADY IN HONG KONG, WHILE A NUMBER OF OTHER BANKS WITHOUT A BANKING LICENCE OPERATED HERE THROUGH DEPOSIT-TAKING COMPANIES.

HONG KONG HAD ALTOGETHER 141 LICENSED BANKS, 33 LICENSED AND 306 REGISTERED DTCS. THERE WERE, IN ADDITION, 117 BANK REPRESENTATIVE OFFICES.

OF THE TOP 50 BANKS IN THE WORLD, 44, OR VIRTUALLY NINE OUT OF TEN, OPERATED IN HONG KONG.

+THEIR PRESENCE HAS PLAYED A MAJOR PART IN MAKING THE

WE BELIEVE THE TERRITORY AN INTERNATIONAL FINANCIAL CENTRE THIRD LARGEST IN THE WORLD, SIR JOHN SAID.

THE DETERMINATION OF THE GOVERNMENT TO KEEP ITS INVOLVEMENT IN THE PRIVATE SECTOR TO THE MINIMUM WAS JUST ONE INCENTIVE WHICH HAD LED SO MANY INTERNATIONAL BANKS TO ESTABLISH THEIR PRESENCE HERE.

+IN FINANCIAL MATTERS WE SEEK ONLY TO ENSURE THAT THERE IS AN ADEQUATE BASIS FOR MACRO MONETARY POLICY AND THAT SOUND BUSINESS PRACTICES AND AN APPROPRIATE MEASURE OF PROTECTION FOR DEPOSITORS AND INVESTORS PREVAIL. IT MAY SOUND MODERATE= BUT IT IS SIGNIFICANT. AND LIKE EVERYONE ELSE WHO IS SENSIBLE WE LEARN FROM OUR MISTAKES,+ HE SAID,

AGAINST THIS BACKGROUND, HE SAID, ON-GOING CHANGES IN HONG KONG'S APPROACH TO PRUDENTIAL SUPERVISION AND TO BANKING AND DEPOSIT-TAKING LEGISLATION COULD BE TAKEN GENTLY.

WITH NO CENTRAL BANK AND NO INTENTION OF SETTING ONE UP, THE GOVERNMENT'S AIM HAD TO BE TO ENSURE THAT HONG KONG'S APPROACH AND LEGISLATION WERE CONSISTENT WITH PRESENT-DAY REALITIES AND FUTURE OVERALL POLICY OBJECTIVES,

SIR JOHN SAID THAT HONG KONG WAS WELL SERVED BY THE STATUTORY HONG KONG ASSOCIATION OF BANKS, WHOSE EXPERIENCED AND REPRESENTATIV.. COMMITTEE WAS WELL AWARE OF THE VIRTUES OF SELF REGULATION.

/+THE WORLD