XN000022-1986-04-16 — Page 19

WEDNESDAY, APRIL 16, 1986

BANKING BILL FINE EXAMPLE OF CONSULTATION

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THE NEW BANKING BILL IS A FINE EXAMPLE OF THE EFFECTIVE WORKING OF THE CONSULTATIVE PROCESS IN HONG KONG AND ITS EFFECTS WILL BE FELT MUCH MORE BY BANKS INCORPORATED HERE THAN ELSEWHERE, IN ACCORDANCE WITH INTERNATIONAL PRACTICE ON PRUDENTIAL SUPERVISION, THE FINANCIAL SECRETARY, SIR JOHN BREMRIDGE, SAID THIS (WEDNESDAY) EVENING.

ADDRESSING A DINNER OF THE HONG KONG ASSOCIATION OF BANKS AT THE OVERSEAS BANKERS' CLUB, SIR JOHN SAID THE NEW LEGISLATIVE REQUIREMENTS WERE BROADLY IN LINE WITH DEVELOPMENTS IN OTHER MAJOR BANKING CENTRES.

+SOME ARE MODEST IN COMPARISON, BUT THERE ARE OTHER INNOVATIVE IDEAS ON TO WHICH OTHER CENTRES HAVE SINCE CAUGHT. SO THE WORRY SOMETIMES EXPRESSED THAT WE WOULD REGULATE OURSELVES OUT OF THE INTERNATIONAL MARKET WILL, I AM SURE, PROVE TO BE UNFOUNDED,+ SIR JOHN SAID.

SUBJECT TO SIZE OF ASSETS AND, TO A DEGREE, RECIPROCITY, FOREIGN BANKS WERE FREE TO ENTER OUR MARKET. +THEY HAVE BEEN DOING SO STEADILY OVER THE PAST FEW YEARS - IN FACT OVER 30 OF THEM IN THE LAST FIVE YEARS,+ HE SAID.

+ IT IS THEREFORE OUR POLICY STANCE ON BANKING: COMPETITION WITHIN A FRAMEWORK OF PRUDENCE,+ HE STRESSED.

+ IN RETROSPECT, GIVEN THE SHOCKS EXPERIENCED IN THE PAST FEW YEARS, PARTICULARLY THE RISE AND FALL IN PROPERTY PRICES, DIFFICULTIES FOR BANKS WERE INEVITABLE. WE HAVE COME THROUGH THE PERIOD WITH FAR LESS DAMAGE THAN MIGHT HAVE BEEN EXPECTED,+ SIR JOHN SAID.

HE SAID THE TWO BANKS THAT THE GOVERNNMENT NOW OWNED WOULD IN TIME BE SOLD BACK TO PRIVATE HANDS.

BUT, AS CONTROLLER OF THE EXCHANGE FUND WHICH HAD PUT UP THE MONEY REQUIRED FOR THESE RESCUES, HE SAID THE ONLY QUESTION IN SELLING THEM WAS WHEN AND FOR HOW MUCH, IN ORDER TO MINIMISE THE EVENTUAL COST.

SIR JOHN SAID THE PROBLEMS IN THE BANKING SECTOR HAD LED PROPERLY AND INEVITABLY TO 'PROBING' ON TWO ISSUES: FIRSTLY, DEPOSIT INSURANCE TO PROTECT DEPOSITORS IN CASE OF BANK FAILURE AND, SECONDLY, THE NEED TO STRENGTHEN PRUDENTIAL SUPERVISION TO PREVENT BANK FAILURES.

THE FINANCIAL SECRETARY SAID HE RELUCTANTLY AGREED THAT DEPOSIT INSURANCE WOULD NOT WORK. THE AIM HAD MERIT BUT THE MEANS OF ACHIEVING IT WERE NOT PRACTICAL.

/+A DEPOSIT ...................