XN000022-1987-03-18 — Page 3

WEDNESDAY, MARCH 18, 1987

ASSET CRITERIA FOR FOREIGN BANKS MORE FLEXIBLE

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THE EXECUTIVE COUNCIL HAD RECENTLY CONSIDERED THE ASSET CRITERION OF FOREIGN BANKS TO SET UP BUSINESS IN HONG KONG AND IT WAS DECIDED THAT THE GOVERNOR-IN-COUNCIL MAY APPROVE APPLICATIONS EVEN THOUGH THE ASSET CRITERION OF U.S. $14 BILLION WAS NOT SATISFIED, THE FINANCIAL SECRETARY, THE HON PIERS JACOBS, SAID TODAY (WEDNESDAY).

SPEAKING AT THE LEGISLATIVE COUNCIL MEETING MR JACOBS NOTED THAT THE MINIMUM ASSETS WAS NOT MEANT TO BE INFLEXIBLE AND THAT THERE WAS SOME DISCRETION.

HE RECALLED THAT THE CURRENT POLICY ON APPLICATIONS FOR BANKING LICENCES WAS INTRODUCED IN MAY 1981 AND IT WAS DESIGNED TO MODERATE THE INFLUX OF FOREIGN BANKS INTO HONG KONG BY RESTRICTING THE POOL OF ELIGIBLE APPLICANTS.

HE POINTED OUT THAT THE POLICY HAD ACHIEVED THE OBJECTIVE AND FROM 1981 TO 1986 AN AVERAGE OF ABOUT SEVEN NEW LICENCES A YEAR WERE GRANTED.

+ HOWEVER, IN SETTING A HIGH ASSET THRESHOLD, THE POLICY HAS INEVITABLY FAVOURED BANKS INCORPORATED IN COUNTRIES WITH RELATIVELY LARGE ECONOMICS. OF THE 41 BANKS LICENSED FROM 1981 TO 1986, 18 ARE FROM JAPAN, 15 FROM EEC COUNTRIES, SIX FROM NORTH AMERICA AND FOUR FROM AUSTRALIA,+ HE SAID.

+NO LICENCES IN THE LAST FEW YEARS HAVE BEEN GRANTED TO BANKS FROM ANY OF THE SMALLER COUNTRIES IN THE ASIAN-PACIFIC REGION, ALTHOUGH THE REGION IS WELL REPRESENTED BY VIRTUE OF EARLIER ENTRY, HE ADDED.

+THERE HAVE BEEN SOME CHANGES IN CIRCUMSTANCES SINCE 1981. FIRST, ABOUT 75 PER CENT OF THE LARGEST 100 BANKS IN THE WORLD ARE ALREADY LICENSED IN HONG KONG ANOTHER FAST INFLUX IS THEREFORE UNLIKELY.

+SECOND, THE SIZE OF A BANK'S ASSETS IS NO LONGER REGARDED AS THE ONLY MEASURE OF ITS SOUNDNESS OTHER MEASURES SUCH AS CAPITAL ADEQUACY, PROFITABILITY, QUALITY OF MANAGEMENT, ARE ALSO RELAVANT.

+THIRD, AS HONG KONG HAS ADVANCED AS AN INTERNATIONAL FINANCIAL CENTRE IN THE LAST FEW YEARS, THERE HAS ALSO BEEN A RAPID GROWTH OF INTERNATIONAL BANKING, WITH MORE COUNTRIES OPENING THEIR DOORS TO FOREIGN BANKS.+

HAVING REGARD TO THE FACTORS, AN ELEMENT OF FLEXIBILITY IN ADMINISTERING THE ASSET CRITERION WAS WARRANTED, AND FLEXIBILITY WAS ALSO NEEDED IF THAT CRITERION WAS NOT IN THE WAY OF FURT HER WIDENING THE GEOGRAPHICAL SPREAD OF INTERNATIONAL BANKING

PRESENCE IN HONG KONG.

/MR JACOBS