XN000022-1987-04-01 — Page 8

WEDNESDAY, APRIL 1, 1987

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FREEDOM NEEDED FOR SECURITIES RELATED BUSINESS

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IT IS GOVERNMENT'S GENERAL PHILOSOPHY THAT AUTHORISED INSTITUTIONS THAT DEAL WITH SECURITIES RELATED BUSINESS SHOULD BE GIVEN AS MUCH FREEDOM AS POSSIBLE SO LONG AS THEY ARE AWARE OF THE RISKS INVOLVED AND ARE ADEQUATELY CAPITALISED TO ASSUME THOSE RISKS, THE FINANCIAL SECRETARY, THE HON PIERS JACOBS, SAID TODAY (WEDNESDAY).

WINDING THE RESUMED DEBATE ON THE APPROPRIATION BILL 1987 IN THE LEGISLATIVE COUNCIL. HE SAID THE SUBJECT OF SECURITIES DEALING BY AUTHORISED INSTITUTIONS WAS CURRENTLY BEING EXAMINED BY THE COMMISSIONER FOR BANKING.

+ IT IS USEFUL TO REMEMBER IN THIS CONNECTION THAT THE NEW CAPITAL ADEQUACY REQUIREMENTS IN THE BANKING ORDINANCE ARE NOT SCHEDULED TO COME INTO EFFECT UNTIL SEPTEMBER 1988 AND THAT THE CAPITAL REQUIREMENTS IN THE SECURITIES ORDINANCE, DESIGNED FOR GOOD PRUDENTIAL REASONS FOR COMPLIANCE BY THOSE DEALING IN SECURITIES, ARE OF A DIFFERENT, AND MORE SPECIALISED NATURE,+ MR JACOBS SAID.

HE ADDED HOWEVER THAT IT MUST BE RECOGNISED THAT ARBITRAGING BETWEEN DIFFERENT SUPERVISORY REQUIREMENTS COULD BE DAMAGING TO MARKET REPUTATION AND TO THE INTERESTS OF DEPOSITORS AND INVESTORS.

+ IT IS OUR AIM TO REMOVE ANY UNNECESSARY DUPLICATION OF REQUIREMENTS IN THESE TWO AREAS HENCE MY DECISION ANNOUNCED SOME TIME AGO AND IMPLEMENTED LAST SEPTEMBER TO BRING TOGETHER UNDER THE SECRETARY FOR MONETARY AFFAIRS POLICY RESPONSIBILITIES FOR THE FINANCIAL MARKET, HE SAID.

ON A SUGGESTION THAT THE POTENTIAL DANGER ARISING FROM A LIQUIDITY CRISIS UNDER THE CURRENT ARRANGEMENTS WAS EVER PRESENT. MR JACOBS STRESSED THAT THE GOVERNMENT WOULD TRY ITS BEST TO KEEP AHEAD OF MARKET DEVELOPMENTS SO AS TO AVOID ANY POTENTIAL DANGERS.

NEED TO KEEP REASONABLE AMOUNT OF RESERVES IN HAND

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THE FINANCIAL SECRETARY

THE HON PIERS JACOBS, SAID TODAY (WEDNESDAY) THAT THE GOVERNMENT'S RESERVES WERE THE BEST GUARANTEE OF STABILITY IN OUR PUBLIC FINANCES AND PRUDENCE DICTATED THAT A REASONABLE AMOUNT IN HAND WAS KEPT.

WINDING UP THE RESUMED DEBATE OF THE APPROPRIATION BILL 1987 IN THE LEGISLATIVE COUNCIL. MR JACOBS SAID THIS WAS SOMETHING THAT THE GOVERNMENT WOULD CONTINUE TO WATCH CAREFULLY.

ACKNOWLEDGING THAT